Quiz on Price determination in different markets

#1. Which of the following statements is incorrect?

Commodities offered for sale under a perfect competition will be heterogeneous.

A monopolist may restrict the output and raise the price

Product differentiation is peculiar to monopolistic competition

Under monopoly there is no difference between a firm and an industry

#2. When e = 1 then MR is

positive

negative

zero

one

#3. Which of the following is not a characteristic of a competitive market?

Firms can freely enter or exit the market

There are many buyers and sellers in the market

Firms generate small but positive supernormal profits in the long run

The goods offered for sales are largely the same

#4. The demand curve of a monopoly firm will be __________________

Upward sloping

Vertical

Horizontal

Downward sloping

#5. Which is the first order condition for the profit of a firm to be maximum?

AC = MR

MC = MR

AC = AR

MR = AR

#6. Which of the following is not a characteristic of a perfectly competitive market?

Outputs of the firms are perfect substitutes for one another.

Firms face downward-sloping demand curves

Large number of firms in the industry

Resources are very mobile.

#7. Which of the following statements is false?

Economic profit will always be less than accounting profit if resources owned and used by the firm have any opportunity costs.

Accounting costs include only explicit costs.

Accounting profit is equal to total revenue less implicit costs

Economic costs include the opportunity costs of the resources owned by the firm.

#8. In oligopoly, when the industry is dominated by one large firm which is considered as leader of the group, Then it is called:

partial oligopoly

syndicated oligopoly

collusive oligopoly

full oligopoly

#9. Under perfect competition a firm is the ___________

none of the above

neither price-maker nor price-taker

price-taker and not price-maker

price-maker and not price-taker

#10. One characteristic not typical of oligopolistic industry is

too much importance to non-price competition.

a small number of firms in the industry

horizontal demand curve.

price leadership

#11. Suppose the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilisation of personal computers. Which of the following will happen to equilibrium price and equilibrium quantity?

Quantity will increase; price cannot be determined.

Price will decrease; quantity cannot be determined

Price will increase; quantity cannot be determined

Quantity will decrease; price cannot be determined.

#12. The long-run equilibrium outcomes in monopolistic competition and perfect competition are similar, because in both market structures

firms will be producing at minimum average cost.

firms realise all economies of scale.

firms will only earn a normal profit.

the efficient output level will be produced in the long run

#13. Marginal Revenue is equal to:

The change in price divided by the change in output

The change in P x Q due to a one unit change in output

The change in quantity divided by the change in price

Price, but only if the firm is a price searcher

#14. A market structure in which many firms sell products that are similar but not identical is known as

perfect competition

monopoly

monopolistic competition

oligopoly

#15. Average revenue curve is also known as:

Profit Curve

Demand Curve

Average Cost Curve

Indifference Curve

#16. Conditions for equilibrium of a firm are:

MR = AR and MC should cut MR from below

MR = MC

MR = MC and MC should have a positive slope.

MC should cut MR from below

#17. Monopoly may arise in a product market because

All the above.

The government has given the firm patent right to produce the commodity

A significantly important resource for the production of the commodity is owned by a single firm

The costs of production and economies of scale makes production by a single producer more efficient

#18. For market the essential condition is –

Close contact between buyers and sellers

A particular geographical place

None of these

Control of the government

#19. When price is less than average variable cost at the profit-maximising level of output, a firm should:

produce where marginal revenue equals marginal cost if it is operating is the long run

shutdown, since it cannot even cover its variable costs if it stays in business

shutdown, since it will lose nothing in that case

produce where marginal revenue equals marginal cost if it is operating in the short run

#20. A firm encounters its “shutdown point” when:

average fixed cost equals price at the profit-maximising level of output.

marginal cost equals price at the profit-maximising level of output

average variable cost equals price at the profit-maximising level of output

average total cost equals price at the profit-maximising level of output

#21. Assume that consumers’ incomes and the number of sellers in the market for good A both decrease. Based upon this information, we can conclude, with certainty, that the equilibrium:

price will increase

price will decrease

quantity will increase.

quantity will decrease

#22. Which of the following is not a characteristic of a “price-taker”?

TR = P x Q

Marginal Revenue = Price

AR = Price

Negatively – sloped demand curve

#23. AR can be symbolically written as:

Price × quantity

TR / Q

MR / Q

none of the above

#24. Price Discrimination cannot persist under the following market form:

Monopolistic

Monopoly

Perfect Competition

Oligopoly

#25. Price discrimination will be profitable only if the elasticity of demand in different sub-markets is

uniform

zero

different

less

#26. Average revenue is equal to

Nothing but price of one unit of output

Graphically it denotes the firm’s supply curve.

The change in P & Q due to a one unit change in output.

The change in quantity divided by change in price

#27. In a very short period market:

the demand is fixed

the supply is fixed

demand and supply are fixed

none of the above

#28. When ________________________________ , we know that the firms are earning just normal profits

AR = MR

AC = AR

MC = MR

MC = AC

#29. Under _________________ the monopolist will fix a price which will take away the entire consumers’ surplus.

first degree of price discrimination

none of the above

second degree of price discrimination

third degree of price discrimination

#30. Combination of Monopoly Market and Monopsony Market is called as:

Bilateral Monopoly Market

Oligopoly Market

Duopoly Market

Monopolistic Market

#31. Discriminating monopoly implies that the monopolist charges different prices for his commodity:

at different places

for different uses

any of the above.

from different groups of consumers

#32. What is the shape of the demand curve faced by a firm under perfect competition?

Vertical

Negatively sloped

Positively sloped

Horizontal

#33. AR is also known as:

none of the above

price

revenue

income

#34. If the average cost is higher than the average revenue then the firm incurs _________________

Normal profit

Loss

Abnormal profit

No profit, no loss

#35. Suppose a firm is producing a level of output such that MR > MC, what should be firm do to maximize its profits?

The firm should hire less labour

The firm should increase output

The firm should increase price.

The firm should do nothing.

#36. A Monopolist is a

price-taker

price-adjuster

price-maker

none of the above

#37. Suppose that, at the profit-maximizing level of output, a firm finds that market price is less than average total cost, but greater than average variable cost. Which of the following statements is correct?

The firm should raise its price enough to cover its losses

The firm should shutdown in order to minimise its losses.

The firm should continue to operate in the short run in order to minimize its losses.

The firm should move its resources to another industry.

#38. The market for hand tools (such as hammers and screwdrivers) is dominated by Draper, Stanley, and Craftsman. This market is best described as

an oligopoly

Monopolistically competitive

perfectly competitive

a monopoly

#39. Which of the following markets would most closely satisfy the requirements for a perfectly competitive market?

Cola

Milk

Cable television

Electricity

#40. The structure of the cold drink industry in India is best described as

perfectly competitive

monopolistically competitive

monopolistic.

oligopolistic

#41. Which of the following is the distinguishing characteristic of oligopolies?

A standardized product

The goal of profit maximization

Downward-sloping demand curves faced by firms

The interdependence among firms

#42. Secular period is also known as

very short period

short period

very long period

long period

#43. The firm in a perfectly competitive market is a price-taker. This designation as a price-taker is based on the assumption that

there are so many buyers and sellers in the market that any individual firm cannot affect the market.

each firm produces a homogeneous product.

there is easy entry into or exit from the market place.

the firm has some, but not complete, control over its product price

#44. If firms in the toothpaste industry have the following market shares, which market structure would best describe the industry? qno 36 pgno 4.59

Oligopoly

Perfect competition

Monopoly

Monopolistic competition

#45. Which of the following statements is incorrect?

Firms in a perfectly competitive market are price takers.

Even a monopolistic firm can have losses.

Kinked demand curve is related to an oligopolistic market

It is always beneficial for a firm in a perfectly competitive market to discriminate prices

#46. In the context of oligopoly, the kinked demand hypothesis is designed to explain

Price rigidity

Collusion among rivals.

Price and output determination

Price leadership

#47. In the long-run equilibrium of a competitive market, firms operate at

their efficient scale

zero economic profit

the intersection of the marginal cost and marginal revenue

all of these answers are correct

#48. Generally, perishable goods like butter, eggs, milk, vegetables etc., will have

regional market

none of the above

local market

national market

#49. For a price-taking firm :

marginal revenue is less than price.

the relationship between marginal revenue and price is indeterminate

marginal revenue is equal to price

marginal revenue is greater than price.

#50. The structure of the toothpaste industry in India is best described as

monopolistically competitive

perfectly competitive.

monopolistic

oligopolistic.

#51. Total revenue =

income × quantity

none of the above

price × income

price × quantity

#52. Example of a commodity said to have an International Market.

High Value and Small Bulk Commodities.

Bulky Articles.

Product whose trading is restricted by government.

Perishable Goods

#53. Which of the following is not a characteristic of a monopolistically competitive market?

Many sellers

Differentiated products

Free entry and exit

Abnormal profits in the long run

#54. Assume that when price is ` 20, the quantity demanded is 15 units, and when price is ` 18, the quantity demanded is 16 units. Based on this information, what is the marginal revenue resulting from an increase in output from 15 units to 16 units?

` 16

` 18

` 28

−` 12

#55. Natural Monopoly arises when

There are stringent legal and regulatory requirement.

There are very large Economies of Scale

There is enormous goodwill enjoyed by a firm

There are Business Combinations and Cartels.

#56. Price discrimination is related to

time

income

size of the purchase

any of the above

#57. When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is

less than the price charged by either monopoly or a competitive market

more than the price charged by a monopoly and less than the price charged by a competitive market

less than the price charged by a monopoly and more than the price charged by a competitive market.

more than the price charged by either monopoly or a competitive market

#58. Price discrimination is one of the features of ___________

perfect competition

monopolistic competition

monopoly

oligopoly

#59. Price-taking firms, i.e., firms that operate in a perfectly competitive market, are said to be “small” relative to the market. Which of the following best describes this smallness?

The individual firm has assets of less than ` 20 lakhs

The individual firm must have fewer than 10 employees

The individual firm faces a downward-sloping demand curve.

The individual firm is unable to affect market price through its output decisions.

#60. With a given supply curve, a decrease in demand causes

an overall decrease in price but an increase in equilibrium quantity.

an overall decrease in price and a decrease in equilibrium quantity

an overall increase in price but a decrease in equilibrium quantity

no change in overall price but a reduction in equilibrium quantity.

#61. Which of the following statements is correct?

Selling costs are possible under perfect competition

An industry consists of many firms.

Price rigidity is an important feature of monopoly.

Under perfect competition factors of production do not move freely as there are legal restrictions.

#62. Sweezy’s Model explains the concept of price rigidity relating to following market form

Oligopoly Market

Perfect Competition Market

Monopoly Market

Monopolistic Market

#63. When the monopolist divides the consumers into separate sub markets and charges different prices in different sub-markets it is known as

third degree of price discrimination

none of the above

second degree of price discrimination

first degree of price discrimination

#64. Suppose that a sole proprietorship is earning total revenues of ` 1,00,000 and is incurring explicit costs of ` 75,000. If the owner could work for another company for ` 30,000 a year, we would conclude that :

The firm is incurring an economic loss

The total economic costs are ` 1,00,000

The individual is earning an economic profit of ` 25,000

Implicit costs are ` 25,000.

#65. The market for the ultimate consumers is known as

regulated market

retail market

whole sale market

unregulated market

#66. Which of the following is not a characteristic of monopolistic competition?

Ease of entry into the industry.

Product differentiation

A homogeneous product

A relatively large number of sellers.

#67. In Economics, the term ‘market’ refers to a:

place where buyer does not bargain

place where seller does not bargain

place where buyer and seller bargain a product or service for a price

none of the above

#68. In which form of the market structure is the degree of control over the price of its product by a firm very large?

Oligopoly

Perfect competition

Monopoly

Imperfect Competition

#69. Price varies by attributes such as location or by Customer Segment is __________ degree of Price Discrimination.

Third

Second

First

Fourth

#70. If supply increases in a greater proportion than demand

The new equilibrium price will be lower than the original equilibrium and the new equilibrium quantity will be higher.

The new equilibrium price will be greater than the original equilibrium price but equilibrium quantity will be higher.

The new equilibrium price and quantity will be lower than the original equilibrium price and quantity

The new equilibrium price and quantity will be greater than the original equilibrium price and quantity.

#71. Monopolistic competition differs from perfect competition primarily because

in perfect competition, firms can differentiate their products.

in monopolistic competition, entry into the industry is blocked.

in monopolistic competition, firms can differentiate their products

in monopolistic competition, there are relatively few barriers to entry

#72. Suppose that the demand curve for the XYZ Co. slopes downward and to the right. We can conclude that

the firm operates in a perfectly competitive market.

the firm can sell all that it wants to at the established market price

the XYZ Co. is not a price-taker in the market because it must lower price to sell additional units of output.

the XYZ Co. will not be able to maximise profits because price and revenue are subject to change

#73. When e < 1 then MR is

one

zero

positive

negative

#74. When ________________________________, we know that the firms under perfect competition must be producing at the minimum point of the average cost curve and so there will be productive efficiency

MC = MR

AR = MR

MC = AC

AC = AR

#75. Stock Exchange is example of ________ Market:

Regulated Market

Retail Market

Forward Market

Spot Market

#76. Under which of the following forms of market structure does a firm have no control over the price of its product?

Oligopoly

Monopoly

Perfect competition

Monopolistic competition

#77. At price P1, the firm in the figure would produce QNO 75 PGNO 4.64

Zero output

#78. Assume that when price is ` 20, the quantity demanded is 9 units, and when price is ` 19, the quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units

` 19

` 10

` 20

` 1

#79. In the table below what will be equilibrium market price? qno 1 pgno 4.53

` 3

` 2

` 5

` 4

#80. Stock exchange market is an example of

unregulated market

regulated market

none of the above

spot market

#81. When e > 1 then MR is

positive

zero

negative

one

#82. Pure oligopoly is based on the ________________ products

unrelated

homogeneous

differentiated

none of the above

#83. It is assumed in economic theory that

decision making within the firm is usually undertaken by managers, but never by the owners

the ultimate goal of the firm is to maximise profits, regardless of firm size or type of business organisation.

as the firm’s size increases, so do its goals.

the basic decision making unit of any firm is its owners.

#84. Oligopolistic industries are characterized by:

a few large firms and no entry barriers

a large number of small firms and no entry barriers.

one dominant firm and low entry barriers

a few dominant firms and substantial barriers to entry

#85. When ______________________________, there will be allocative efficiency meaning thereby that the cost of the last unit is exactly equal to the price consumers are willing to pay for it and so that the right goods are being sold to the right people at the right price

MC = AR

AR = MR

MC = AC

MC = MR

#86. Assume that in the market for good Z there is a simultaneous increase in demand and the quantity supplied. The result will be :

an increase in equilibrium quantity and uncertain effect on equilibrium price

an increase in equilibrium price and quantity.

a decrease in equilibrium price and increase in equilibrium quantity

a decrease in equilibrium price and quantity

#87. Under monopoly, the degree of control over price is:

none

very considerable

some

none of the above

#88. Which of the following is not a condition of perfect competition?

Perfect mobility of factors.

Informative advertising to ensure that consumers have good information

A large number of firms.

Freedom of entry and exit into and out of the market.

#89. Which of the following is not an essential condition of pure competition?

Absence of transport cost

Large number of buyers and sellers

Freedom of entry

Homogeneous product

#90. Time element was conceived by

Pigou

Alfred Marshall

Lionel Robinson

Adam Smith

#91. The kinked demand curve model of oligopoly assumes that

the response (of consumers) to a price increase is more than the response to a price decrease

the elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.

the elasticity of demand is constant regardless of whether price increases or decreases.

the response (of consumers) to a price increase is less than the response to a price decrease.

#92. Agricultural goods markets depict characteristics close to

oligopoly.

monopoly

monopolistic competition.

perfect competition

#93. Which of the following statements is accurate regarding a perfectly competitive firm?

Average revenue need not be equal to price

Demand curve is downward sloping

The demand curve always lies above the marginal revenue curve

Price is given and is determined by the equilibrium in the entire market

#94. Under perfect competition, in the long run, there will be no ________________ .

supernormal profits.

production

normal profits

costs.

#95. A purely competitive firm’s supply schedule in the short run is determined by

its marginal utility for money curve.

its marginal cost curve

its marginal revenue

its average revenue

#96. The firm and the industry are one and the same in _______________

Monopoly

Duopoly

Perfect competition

Monopolistic competition

#97. The condition for pure competition is

large number of buyer and seller, homogeneous product, perfect knowledge about the product

homogeneous product

homogeneous product and large number of buyer and seller, free entry and exist

large number of buyer and seller, free entry and exist

#98. Marginal revenue can be defined as the change in total revenue resulting from the:

purchase of an additional unit of a commodity

none of the above

sale of subsequent units of a product

sales of an additional unit of a commodity

#99. Average revenue is the revenue earned

different units of input

per unit of input

different units of output

per unit of output

#100. When the products are sold through a centralized body, oligopoly is known as

partial oligopoly

syndicated oligopoly

competitive oligopoly

organized oligopoly

#101. Assume that when Price is ₹10, the quantity demanded is 5 units and when Price is ₹12 the quantity demanded is 4 units .Based on this information, what is the Marginal Revenue resulting from increase in output from 4 units to 5 units

₹4

₹2

₹5

₹3

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