Quiz on Price determination in different markets

#1. AR can be symbolically written as:

TR / Q

none of the above

Price × quantity

MR / Q

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

The goal of profit maximization

The interdependence among firms

A standardized product

Downward-sloping demand curves faced by firms

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

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

place where seller does not bargain

none of the above

place where buyer does not bargain

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

The demand curve always lies above the marginal revenue curve

Average revenue need not be equal to price

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

Demand curve is downward sloping

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

first degree of price discrimination

third degree of price discrimination

second degree of price discrimination

none of the above

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

Cola

Milk

Electricity

Cable television

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

perfectly competitive.

oligopolistic.

monopolistically competitive

monopolistic

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

for different uses

any of the above.

from different groups of consumers

at different places

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

Oligopoly

Imperfect Competition

Monopoly

Perfect competition

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

Firms generate small but positive supernormal profits in the long run

There are many buyers and sellers in the market

Firms can freely enter or exit the market

The goods offered for sales are largely the same

#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 increase; quantity cannot be determined

Price will decrease; quantity cannot be determined

Quantity will decrease; price cannot be determined.

#12. 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

₹5

₹3

₹2

₹4

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

a monopoly

Monopolistically competitive

perfectly competitive

an oligopoly

#14. When e > 1 then MR is

negative

zero

one

positive

#15. Time element was conceived by

Alfred Marshall

Adam Smith

Pigou

Lionel Robinson

#16. 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 individual is earning an economic profit of ` 25,000

The firm is incurring an economic loss

The total economic costs are ` 1,00,000

Implicit costs are ` 25,000.

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

Monopolistic competition

Perfect competition

Monopoly

Oligopoly

#18. 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.

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

Accounting profit is equal to total revenue less implicit costs

Accounting costs include only explicit costs.

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

Oligopoly Market

Monopolistic Market

Monopoly Market

Perfect Competition Market

#20. 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 shutdown in order to minimise its losses.

The firm should move its resources to another industry.

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

The firm should raise its price enough to cover its losses

#21. Marginal Revenue is equal to:

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

Price, but only if the firm is a price searcher

The change in price divided by the change in output

The change in quantity divided by the change in price

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

Oligopoly

Perfect Competition

Monopolistic

Monopoly

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

perfect competition

monopolistic competition

monopoly

oligopoly

#24. When e = 1 then MR is

positive

one

negative

zero

#25. 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

` 20

` 10

` 1

` 19

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

Second

Fourth

First

Third

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

Freedom of entry

Absence of transport cost

Homogeneous product

Large number of buyers and sellers

#28. Average revenue curve is also known as:

Demand Curve

Profit Curve

Indifference Curve

Average Cost Curve

#29. 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 is unable to affect market price through its output decisions.

The individual firm must have fewer than 10 employees

The individual firm faces a downward-sloping demand curve.

#30. Natural Monopoly arises when

There are stringent legal and regulatory requirement.

There is enormous goodwill enjoyed by a firm

There are Business Combinations and Cartels.

There are very large Economies of Scale

#31. Stock exchange market is an example of

spot market

none of the above

unregulated market

regulated market

#32. For market the essential condition is –

None of these

Close contact between buyers and sellers

A particular geographical place

Control of the government

#33. One characteristic not typical of oligopolistic industry is

too much importance to non-price competition.

a small number of firms in the industry

price leadership

horizontal demand curve.

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

monopolistic.

oligopolistic

perfectly competitive

monopolistically competitive

#35. 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

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

national market

regional market

local market

none of the above

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

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 greater than the original equilibrium price and quantity.

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

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

#38. Which of the following statements is correct?

An industry consists of many firms.

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

Selling costs are possible under perfect competition

Price rigidity is an important feature of monopoly.

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

Bilateral Monopoly Market

Duopoly Market

Monopolistic Market

Oligopoly Market

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

A relatively large number of sellers.

Product differentiation

A homogeneous product

Ease of entry into the industry.

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

the efficient output level will be produced in the long run

firms will be producing at minimum average cost.

firms realise all economies of scale.

firms will only earn a normal profit.

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

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

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

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

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

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

Marginal Revenue = Price

Negatively – sloped demand curve

TR = P x Q

AR = Price

#44. Conditions for equilibrium of a firm are:

MR = MC and MC should have a positive slope.

MR = AR and MC should cut MR from below

MC should cut MR from below

MR = MC

#45. It is assumed in economic theory that

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

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.

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

#46. 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 in the short run

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

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

oligopoly

perfect competition

monopoly

monopolistic competition

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

Normal profit

No profit, no loss

Abnormal profit

Loss

#49. Agricultural goods markets depict characteristics close to

monopoly

monopolistic competition.

perfect competition

oligopoly.

#50. Which of the following statements is incorrect?

Product differentiation is peculiar to monopolistic competition

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

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

A monopolist may restrict the output and raise the price

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

its marginal cost curve

its marginal utility for money curve.

its average revenue

its marginal revenue

#52. 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?

` 28

−` 12

` 18

` 16

#53. Which of the following statements is incorrect?

Firms in a perfectly competitive market are price takers.

Kinked demand curve is related to an oligopolistic market

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

Even a monopolistic firm can have losses.

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

` 4

` 5

` 3

` 2

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

Perfect mobility of factors.

Informative advertising to ensure that consumers have good information

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

A large number of firms.

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

some

none of the above

very considerable

none

#57. Monopolistic competition differs from perfect competition primarily because

in perfect competition, firms can differentiate their products.

in monopolistic competition, firms can differentiate their products

in monopolistic competition, entry into the industry is blocked.

in monopolistic competition, there are relatively few barriers to entry

#58. Average revenue is equal to

The change in quantity divided by change in price

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

Graphically it denotes the firm’s supply curve.

Nothing but price of one unit of output

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

Firms face downward-sloping demand curves

Outputs of the firms are perfect substitutes for one another.

Large number of firms in the industry

Resources are very mobile.

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

first degree of price discrimination

second degree of price discrimination

none of the above

third degree of price discrimination

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

Upward sloping

Downward sloping

Vertical

Horizontal

#62. 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 price and quantity.

an increase in equilibrium quantity and uncertain effect on equilibrium price

a decrease in equilibrium price and increase in equilibrium quantity

a decrease in equilibrium price and quantity

#63. Average revenue is the revenue earned

different units of output

per unit of output

per unit of input

different units of input

#64. Pure oligopoly is based on the ________________ products

none of the above

unrelated

homogeneous

differentiated

#65. 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:

quantity will increase.

price will increase

quantity will decrease

price will decrease

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

normal profits

production

costs.

supernormal profits.

#67. 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

AR = MR

MC = AC

MC = AR

MC = MR

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

Negatively sloped

Positively sloped

Vertical

Horizontal

#69. 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 = AC

MC = MR

AR = MR

AC = AR

#70. When e < 1 then MR is

negative

zero

one

positive

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

Product whose trading is restricted by government.

Bulky Articles.

High Value and Small Bulk Commodities.

Perishable Goods

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

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

the firm operates in a perfectly competitive market.

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

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

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

an overall increase in price but a decrease in equilibrium quantity

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

an overall decrease in price and a decrease in equilibrium quantity

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

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

full oligopoly

syndicated oligopoly

collusive oligopoly

partial oligopoly

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

sale of subsequent units of a product

purchase of an additional unit of a commodity

none of the above

sales of an additional unit of a commodity

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

different

zero

less

uniform

#77. Total revenue =

price × income

income × quantity

none of the above

price × quantity

#78. A Monopolist is a

none of the above

price-maker

price-adjuster

price-taker

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

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

more 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

#80. Secular period is also known as

very long period

short period

very short period

long period

#81. Oligopolistic industries are characterized by:

a large number of small firms and no entry barriers.

a few large firms and no entry barriers

one dominant firm and low entry barriers

a few dominant firms and substantial barriers to entry

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

Collusion among rivals.

Price rigidity

Price leadership

Price and output determination

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

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

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

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

each firm produces a homogeneous product.

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

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

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

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

the intersection of the marginal cost and marginal revenue

zero economic profit

all of these answers are correct

their efficient scale

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

organized oligopoly

competitive oligopoly

partial oligopoly

syndicated oligopoly

#87. For a price-taking firm :

marginal revenue is greater than price.

marginal revenue is less than price.

marginal revenue is equal to price

the relationship between marginal revenue and price is indeterminate

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

Monopoly

Perfect competition

Duopoly

Monopolistic competition

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

AC = MR

MC = MR

MR = AR

AC = AR

#90. The condition for pure competition is

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

large number of buyer and seller, free entry and exist

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

homogeneous product

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

Abnormal profits in the long run

Free entry and exit

Many sellers

Differentiated products

#92. Stock Exchange is example of ________ Market:

Forward Market

Regulated Market

Retail Market

Spot Market

#93. Price discrimination is related to

size of the purchase

income

any of the above

time

#94. 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 do nothing.

The firm should increase output

The firm should increase price.

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

whole sale market

regulated market

retail market

unregulated market

#96. AR is also known as:

revenue

none of the above

income

price

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

AR = MR

AC = AR

MC = AC

MC = MR

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

Zero output

#99. In a very short period market:

the supply is fixed

demand and supply are fixed

the demand is fixed

none of the above

#100. Monopoly may arise in a product market because

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

All the above.

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

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

#101. Under perfect competition a firm is the ___________

neither price-maker nor price-taker

price-maker and not price-taker

price-taker and not price-maker

none of the above

finish

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