PRACTISE SHEET

MARKET STRUCTURE

Q1. What does the term "market structure" refer to?

A) The physical location of a market.
B) The organization and characteristics of a market.
C) The pricing strategy of a company.
D) The type of goods sold in a market.

Answer: B) The organization and characteristics of a market.

Q2. Which of the following is not a market structure?

A) Perfect competition
B) Oligopoly
C) Monopoly
D) Consumerism

Answer: D) Consumerism

Q3.Which of the following is a feature of a perfectly competitive market?

A) Few sellers.
B) Barriers to entry.
C) Homogeneous products.
D) Price discrimination.

Answer: C) Homogeneous products.

Q4.In a perfectly competitive market, firms are called "price takers" because:
A) They set the market price.
B) They cannot influence the market price.
C) They produce unique goods.
D) They have monopoly power.

Answer: B) They cannot influence the market price.

Q5.What is the key characteristic of a monopoly?

A) Many sellers.
B) Unique product with no close substitutes.
C) Easy entry into the market.
D) Fierce competition.

Answer: B) Unique product with no close substitutes.

Q6.Barriers to entry are high in which type of market structure?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly

Answer: D) Monopoly

Q7.An oligopoly market structure is characterized by:

A) A single seller.
B) A large number of sellers.
C) A few dominant firms.
D) Perfect information.

Answer: C) A few dominant firms.

Q8. What is collusion in an oligopoly market?

A) Firms competing aggressively on price.
B) Firms agreeing to fix prices or output.
C) Firms producing homogeneous products.
D) Firms eliminating each other from the market.

Answer: B) Firms agreeing to fix prices or output.

Q9. Which of the following is a characteristic of monopolistic competition?

A) Standardized products.
B) No barriers to entry.
C) Differentiated products.
D) Single seller.

Answer: C) Differentiated products.

Q10. In monopolistic competition, product differentiation refers to:

A) Selling identical products.
B) Advertising similar products at the same price.
C) Creating real or perceived differences between products.
D) Selling products below cost.

Answer: C) Creating real or perceived differences between products.

Q11. Which market structure allows firms the greatest market power?
A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) Oligopoly
Answer: C) Monopoly

Q12. Price wars are most common in which market structure?

A) Monopoly
B) Oligopoly
C) Perfect competition
D) Monopolistic competition

Answer: B) Oligopoly

Q13.In the short run, a perfectly competitive firm can earn:

A) Normal profit only.
B) Supernormal profit or incur losses.
C) Only losses.
D) Unlimited profit.

Answer: B) Supernormal profit or incur losses.

Q14. In a perfectly competitive market, the demand curve faced by a firm is:
A) Downward sloping.
B) Upward sloping.
C) Perfectly elastic.
D) Perfectly inelastic.

Answer: C) Perfectly elastic.

Q15. In the long run, a monopolist earns:

A) Zero economic profit.
B) Positive economic profit.
C) Negative economic profit.
D) Normal profit only.

Answer: B) Positive economic profit.

Q16. Price discrimination can only occur if:

A) Products are identical.
B) The market is perfectly competitive.
C) Consumers have different price elasticities of demand.
D) Firms cannot control the price.

Answer: C) Consumers have different price elasticities of demand.

Q17. What is non-price competition?

A) Lowering prices to attract customers.
B) Competing through product differentiation, advertising, or services.
C) Preventing other firms from entering the market.
D) Setting a uniform price in the market.

Answer: B) Competing through product differentiation, advertising, or services.

Q18. A natural monopoly occurs when:

A) The government grants exclusive rights to a firm.
B) A single firm can supply the entire market at a lower cost than multiple firms.
C) Demand for a product is perfectly elastic.
D) There are no barriers to entry.

Answer: B) A single firm can supply the entire market at a lower cost than multiple firms.

Q19. A cartel is an example of:

A) Monopolistic competition.
B) Oligopoly.
C) Perfect competition.
D) Monopoly.

Answer: B) Oligopoly.

Q20. Which market structure is considered the most efficient?

A) Monopoly
B) Perfect competition
C) Oligopoly
D) Monopolistic competition

Answer: B) Perfect competition

Q21. Advertising is most important in which market structure?

A) Monopoly
B) Monopolistic competition
C) Perfect competition
D) Oligopoly

Answer: B) Monopolistic competition

Q22. The kinked demand curve is associated with:

A) Perfect competition.
B) Monopoly.
C) Oligopoly.
D) Monopolistic competition.

Answer: C) Oligopoly.

Q23. Firms maximize profit by producing where:

A) Marginal cost equals marginal revenue.
B) Average cost equals marginal cost.
C) Price equals average total cost.
D) Price equals marginal revenue.

Answer: A) Marginal cost equals marginal revenue.

Q24. Perfect knowledge is a characteristic of:

A) Perfect competition.
B) Monopoly.
C) Monopolistic competition.
D) Oligopoly.

Answer: A) Perfect competition.

Q25. Deadweight loss is commonly associated with:

A) Perfect competition.
B) Monopoly.
C) Oligopoly.
D) Monopolistic competition.

Answer: B) Monopoly.

Q26. Which market structure has the easiest entry for new firms?
A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition

Answer: A) Perfect competition

Q27. Which market structure is characterized by homogeneous products?

A) Monopolistic competition
B) Monopoly
C) Perfect competition
D) Oligopoly

Answer: C) Perfect competition

Q28. In which market structure are firms interdependent in decision-making?

A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition

Answer: C) Oligopoly
Q29. Which market structure provides firms the least market power?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly

Answer: A) Perfect competition

Q30. In the long run, perfectly competitive firms produce at a level where:
A) Price equals marginal cost.
B) Price equals average total cost.
C) Economic profit is zero.
D) All of the above.

Answer: D) All of the above

31. What is the main difference between monopolistic competition and perfect competition?
(a) Number of sellers
(b) Product differentiation
(c) Barriers to entry
(d) Price control
Answer: (b) Product differentiation

32. What is the long-run outcome for firms in monopolistic competition?

(a) High economic profits
(b) Zero economic profits
(c) Continuous losses
(d) Constant economic profits
Answer: (b) Zero economic profits

33. How does advertising benefit consumers in monopolistic competition?

(a) It lowers prices
(b) It provides information about product differences
(c) It eliminates competition
(d) It has no significant benefit for consumers
Answer: (b) It provides information about product differences
34. What is the primary way a monopolist controls the market?
(a) By setting very low prices
(b) By producing a very large quantity
(c) By preventing competitors from entering the market
(d) By relying heavily on advertising
Answer: (c) By preventing competitors from entering the market

35. What is the relationship between price and marginal revenue for a monopolist?
(a) Price is always equal to marginal revenue
(b) Price is always greater than marginal revenue
(c) Price is always less than marginal revenue
(d) The relationship varies depending on the market demand
Answer: (b) Price is always greater than marginal revenue

36.What is the impact of technological advancements on market structure?

(a) They always lead to increased competition
(b) They can create new monopolies
(c) They have no impact on market structure
(d) They always benefit consumers
Answer: (b) They can create new monopolies

37. What is the role of the government in regulating monopolies?

(a) To encourage the formation of monopolies
(b) To prevent monopolies from forming
(c) To have no involvement in market structure
(d) To always break up monopolies
Answer: (b) To prevent monopolies from forming

38. Which market structure is most likely to experience significant advertising expenditures?
(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Answer: (d) Monopolistic competition
39. What is the primary goal of advertising in monopolistic competition?
(a) To lower production costs
(b) To increase market share
(c) To eliminate competitors
(d) To reduce prices
Answer: (b) To increase market share

40. How does product differentiation impact consumer choice in monopolistic competition?
(a) It limits consumer choice
(b) It increases consumer choice
(c) It has no impact on consumer choice
(d) It decreases consumer choice
Answer: (b) It increases consumer choice

41. In which market structure is entry and exit the easiest?

(a) Monopoly
(b) Oligopoly
(c) Monopolistic competition
(d) Perfect competition
Answer: (d) Perfect competition

42. Which market structure typically has the most control over prices?
(a) Perfect competition
(b) Monopolistic competition
(c) Oligopoly
(d) Monopoly
Answer: (d) Monopoly

43. What is a key characteristic of oligopoly markets?

(a) A single seller
(b) A few large sellers
(c) Homogeneous products
(d) No advertising
Answer: (b) A few large sellers
44. What happens to competition when barriers to entry are high?
(a) Competition increases
(b) Competition decreases
(c) Competition remains unchanged
(d) Competition becomes perfect
Answer: (b) Competition decreases

45. How does perfect competition affect pricing?

(a) Firms have no control over pricing
(b) Firms can freely set prices
(c) Firms set prices above marginal cost
(d) Firms engage in price wars
Answer: (a) Firms have no control over pricing

46. What type of products are typically found in monopolistic competition?

(a) Identical products
(b) Differentiated products
(c) Unique products
(d) Commodities only
Answer: (b) Differentiated products

47. Which market structure relies heavily on non-price competition?

(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Answer: (d) Monopolistic competition

48. Why do oligopolistic firms sometimes form cartels?

(a) To promote competition
(b) To avoid government regulation
(c) To maximize joint profits
(d) To lower costs
Answer: (c) To maximize joint profits
49. What happens when perfect competition reaches equilibrium?
(a) Supply exceeds demand
(b) Demand exceeds supply
(c) Price equals marginal cost
(d) Price is set by individual firms
Answer: (c) Price equals marginal cost

50. What feature is unique to monopoly markets?

(a) High competition
(b) A single seller
(c) Free entry and exit
(d) Identical products
Answer: (b) A single seller

51. What is a natural monopoly?

(a) A market with perfect competition
(b) A monopoly that arises due to high fixed costs and economies of scale
(c) A monopoly created by the government
(d) A monopoly with no barriers to entry
Answer: (b) A monopoly that arises due to high fixed costs and economies of scale

52. Why is perfect competition considered efficient?

(a) Firms earn high profits
(b) Resources are allocated optimally
(c) Consumers pay higher prices
(d) There is less consumer choice
Answer: (b) Resources are allocated optimally

53. What is price discrimination?

(a) Charging the same price to all consumers
(b) Charging different prices to different consumers based on willingness to pay
(c) Setting prices equal to marginal cost
(d) Offering discounts only during sales
Answer: (b) Charging different prices to different consumers based on willingness to pay
54. What is collusion in oligopoly markets?
(a) Firms independently setting prices
(b) Firms secretly agreeing to fix prices or restrict output
(c) Firms competing on quality
(d) Firms lowering prices to attract consumers
Answer: (b) Firms secretly agreeing to fix prices or restrict output

55. Why do monopolies lead to market inefficiency?

(a) They produce more than is socially optimal
(b) They charge prices equal to marginal cost
(c) They restrict output and charge higher prices
(d) They increase consumer choice
Answer: (c) They restrict output and charge higher prices

56. What is the main advantage of monopolistic competition for consumers?

(a) Lower prices
(b) Product variety and choice
(c) Guaranteed high quality
(d) Elimination of competition
Answer: (b) Product variety and choice

57. What is predatory pricing?

(a) Charging high prices to maximize profit
(b) Setting prices below cost to eliminate competitors
(c) Charging different prices to different consumers
(d) Matching competitors' prices
Answer: (b) Setting prices below cost to eliminate competitors

58. Which market structure often features interdependent decision-making?

(a) Perfect competition
(b) Monopolistic competition
(c) Oligopoly
(d) Monopoly
Answer: (c) Oligopoly

59. What is the role of patents in a monopoly?

(a) To promote competition
(b) To provide legal protection for innovation
(c) To reduce entry barriers
(d) To prevent monopolies from forming
Answer: (b) To provide legal protection for innovation

60. What type of market structure is the automobile industry an example of?
(a) Perfect competition
(b) Monopolistic competition
(c) Oligopoly
(d) Monopoly
Answer: (c) Oligopoly

61. Which market structure is characterized by many small firms selling identical products?
(a) Monopoly
(b) Oligopoly
(c) Monopolistic competition
(d) Perfect competition
Answer: (d) Perfect competition

62. In which market structure do firms have the most market power?
(a) Monopoly
(b) Oligopoly
(c) Monopolistic competition
(d) Perfect competition
Answer: (a) Monopoly

63. What is a price taker?

(a) A firm that sets the market price of its product
(b) A firm that charges a higher price than its competitors
(c) A firm that charges a lower price than its competitors
(d) A firm that cannot influence the market price of its product
Answer: (d) A firm that cannot influence the market price of its product

64. What is product differentiation?

(a) The process of making a product identical to competing products
(b) The process of lowering the price of a product
(c) The process of increasing the quality of a product
(d) The process of making a product appear different from competing products
Answer: (d) The process of making a product appear different from competing products

65. Which market structure is characterized by a few large firms?

(a) Monopoly
(b) Oligopoly
(c) Monopolistic competition
(d) Perfect competition
Answer: (b) Oligopoly

66. What is a barrier to entry?

(a) A factor that makes it easy for new firms to enter a market
(b) A factor that makes it difficult for existing firms to exit a market
(c) A factor that makes it difficult for new firms to enter a market
(d) A factor that makes it difficult for consumers to enter a market
Answer: (c) A factor that makes it difficult for new firms to enter a market

67. What is a natural monopoly?

(a) A market in which there are many small firms
(b) A market in which there are a few large firms
(c) A market in which a single firm can produce the entire output of the market at a lower
cost than could several firms
(d) A market in which there is no competition
Answer: (c) A market in which a single firm can produce the entire output of the market at a
lower cost than could several firms
68. What is price discrimination?
(a) The practice of charging the same price to all customers for the same product
(b) The practice of charging different prices to different customers for the same product
(c) The practice of charging a higher price than competitors
(d) The practice of charging a lower price than competitors
Answer: (b) The practice of charging different prices to different customers for the same
product

69. What is a cartel?

(a) A group of firms that compete to increase output and lower prices
(b) A group of firms that collude to restrict output and raise prices
(c) A group of firms that merge to form a single firm
(d) A group of firms that cooperate to develop new products
Answer: (b) A group of firms that collude to restrict output and raise prices

70. What is the key characteristic of an oligopoly?

(a) Many small firms
(b) A single seller
(c) Interdependence among firms
(d) Homogeneous products
Answer: (c) Interdependence among firms

71. In perfect competition, what is the primary determinant of a firm's output level?
(a) The firm's advertising budget
(b) The market price
(c) The firm's production costs
(d) The number of competitors
Answer: (b) The market price

72. What is the primary goal of a firm in a perfectly competitive market?

(a) To maximize profit
(b) To minimize costs
(c) To maximize market share
(d) To differentiate its product
Answer: (a) To maximize profit

73. In a monopoly, what is the relationship between price and quantity demanded?
(a) Direct
(b) Inverse
(c) No relationship
(d) Constant
Answer: (b) Inverse

74. How does a monopolist typically determine the profit-maximizing output level?
(a) By setting price equal to marginal cost
(b) By setting marginal revenue equal to marginal cost
(c) By setting price equal to average cost
(d) By setting price equal to total revenue
Answer: (b) By setting marginal revenue equal to marginal cost

75. What are the main barriers to entry in a monopoly?

(a) Low startup costs
(b) Easy access to technology
(c) Government regulations, patents, and control of essential resources
(d) High levels of competition
Answer: (c) Government regulations, patents, and control of essential resources

76. In monopolistic competition, how do firms attempt to differentiate their products?

(a) By lowering prices
(b) By increasing output
(c) By advertising, branding, and product design
(d) By forming cartels
Answer: (c) By advertising, branding, and product design
77. What is price leadership?
(a) When all firms in an oligopoly charge the same price
(b) When one firm in an oligopoly sets the price, and others follow
(c) When firms in an oligopoly engage in price wars
(d) When firms in an oligopoly collude to set prices
Answer: (b) When one firm in an oligopoly sets the price, and others follow

78. What is a kinked demand curve?

(a) A demand curve that is perfectly elastic
(b) A demand curve that is perfectly inelastic
(c) A demand curve with a sharp bend at the current price level
(d) A demand curve that slopes upwards
Answer: (c) A demand curve with a sharp bend at the current price level

79. Which market structure is most likely to experience significant advertising expenditures?
(a) Monopoly
(b) Perfect competition
(c) Oligopoly
(d) Monopolistic competition
Answer: (d) Monopolistic competition

80. In which market structure is price determined solely by supply and demand?
(a) Monopoly
(b) Oligopoly
(c) Monopolistic competition
(d) Perfect competition
Answer: (d) Perfect competition

81. Which market structure has no barriers to entry?

(a) Monopoly
(b) Oligopoly
(c) Perfect competition
(d) Monopolistic competition
Answer: (c) Perfect competition
82. In monopolistic competition, what happens in the long run?
(a) Firms earn supernormal profits
(b) Firms break even as new competitors enter the market
(c) Firms incur losses due to high costs
(d) Firms eliminate product differentiation
Answer: (b) Firms break even as new competitors enter the market

83. What happens if a firm in perfect competition charges a higher price than others?
(a) It will gain market share
(b) It will lose all its customers
(c) It will continue to sell at the same level
(d) It will be able to set a new market price
Answer: (b) It will lose all its customers

84. In which market structure is brand loyalty most important?

(a) Perfect competition
(b) Monopoly
(c) Monopolistic competition
(d) Oligopoly
Answer: (c) Monopolistic competition

85. How do firms in oligopolies typically behave?

(a) They compete aggressively without considering competitors
(b) They ignore competitors' actions
(c) They consider competitors' actions when making decisions
(d) They operate without barriers to entry
Answer: (c) They consider competitors' actions when making decisions

86. What happens when there is perfect information in a market?

(a) Firms can charge higher prices
(b) Consumers can make optimal choices
(c) Barriers to entry increase
(d) Monopoly power strengthens
Answer: (b) Consumers can make optimal choices
87. What is the main feature of monopolistic competition?
(a) Identical products
(b) Few firms
(c) Product differentiation
(d) High barriers to entry
Answer: (c) Product differentiation

88. What happens to profits in the long run under perfect competition?
(a) Firms earn zero economic profit
(b) Firms earn supernormal profits
(c) Firms incur economic losses
(d) Firms set prices to maximize profits
Answer: (a) Firms earn zero economic profit

89.In which market structure do firms face perfectly elastic demand curves?
(a) Monopoly
(b) Oligopoly
(c) Perfect competition
(d) Monopolistic competition
Answer: (c) Perfect competition

90.Which market structure has the most significant barriers to entry?

(a) Monopoly
(b) Oligopoly
(c) Perfect competition
(d) Monopolistic competition
Answer: (a) Monopoly

91. What is the long-run equilibrium in monopolistic competition?

(a) Economic profits for all firms
(b) Zero economic profits for all firms
(c) Economic losses for all firms
(d) Constant economic profits for all firms
Answer: (b) Zero economic profits for all firms

92. How does a monopolist's price compare to its marginal cost?

(a) Price is always equal to marginal cost
(b) Price is always greater than marginal cost
(c) Price is always less than marginal cost
(d) The relationship between price and marginal cost varies
Answer: (b) Price is always greater than marginal cost

93. What is a barrier to entry?

(a) Something that helps new firms enter a market
(b) Something that stops new firms from entering a market
(c) Something that makes it easy for firms to leave a market
(d) Something that makes it hard for consumers to enter a market
Answer: (b) Something that stops new firms from entering a market

94. What are examples of barriers to entry?

(a) Low costs and easy access to resources
(b) Government rules, patents, and controlling key resources
(c) High competition and low demand
(d) Low prices and lots of ads
Answer: (b) Government rules, patents, and controlling key resources

95. What happens to profits in the long run for firms in perfect competition?
(a) Firms always earn high profits
(b) Firms earn zero economic profits
(c) Firms always lose money
(d) Firms usually earn some profit
Answer: (b) Firms earn zero economic profits

96. A single company producing goods cheaper than smaller firms is an example of:
(a) Perfect competition
(b) Monopolistic competition
(c) Oligopoly
(d) Natural monopoly
Answer: (d) Natural monopoly
97.Charging different customers different prices for the same product is called:
(a) Price fixing
(b) Price discrimination
(c) Price leadership
(d) Predatory pricing
Answer: (b) Price discrimination

98. When a few large companies dominate a market, it's called:

(a) Monopoly
(b) Oligopoly
(c) Perfect competition
(d) Monopolistic competition
Answer: (b) Oligopoly

99. In a perfectly competitive market, firms can:

(a) Control the price of their product
(b) Easily enter or exit the market
(c) Differentiate their products
(d) Earn high profits forever
Answer: (b) Easily enter or exit the market

100. What is the main goal of advertising in monopolistic competition?

(a) To lower costs
(b) To make customers think the product is unique
(c) To drive competitors out of business
(d) To force prices down
Answer: (b) To make customers think the product is unique

101. What happens to prices in a monopoly compared to perfect competition?

(a) Monopoly prices are usually higher
(b) Monopoly prices are usually lower
(c) Prices are the same
(d) There's no clear relationship
Answer: (a) Monopoly prices are usually higher
102. What is collusion?
(a) Firms competing aggressively
(b) Firms cooperating to set prices
(c) Firms merging into one
(d) Firms cutting prices
Answer: (b) Firms cooperating to set prices

103. If a company has a patent, it creates:

(a) More competition
(b) A barrier to entry
(c) Easier market access for others
(d) No effect on competitors
Answer: (b) A barrier to entry

104. What are products like in perfect competition?

(a) Highly unique
(b) Identical
(c) Always branded
(d) Sold at high prices
Answer: (b) Identical

105. What is the main goal of a firm in any market structure?

(a) Maximize revenue
(b) Minimize costs
(c) Maximize profit
(d) Satisfy customers
Answer: (c) Maximize profit

106. A market with only one seller is called:

(a) Monopoly
(b) Oligopoly
(c) Perfect competition
(d) Monopolistic competition
Answer: (a) Monopoly

107. What is price leadership?

(a) When all firms charge the same price
(b) When one firm sets the price and others follow
(c) When firms cut prices aggressively
(d) When prices are decided by a cartel
Answer: (b) When one firm sets the price and others follow

108. What is predatory pricing?

(a) Raising prices to increase profits
(b) Cutting prices to drive competitors out of the market
(c) Charging different prices to different customers
(d) Matching competitors’ prices
Answer: (b) Cutting prices to drive competitors out of the market

109. What is a monopoly's goal to keep market power?

(a) By lowering prices
(b) By stopping new firms from entering the market
(c) By producing more goods
(d) By advertising heavily
Answer: (b) By stopping new firms from entering the market

110.What happens to demand if the price of a product increases?

(a) Demand increases
(b) Demand decreases
(c) Demand stays the same
(d) It depends on the product
Answer: (b) Demand decreases
111. In monopolistic competition, firms try to make their products seem different by:
(a) Lowering prices
(b) Advertising and branding
(c) Producing identical goods
(d) Working together with competitors
Answer: (b) Advertising and branding

112. What is an oligopoly?

(a) A market with one seller
(b) A market with a few large sellers
(c) A market with many small sellers
(d) A market with no competition
Answer: (b) A market with a few large sellers

113. In perfect competition, what happens to prices over time?

(a) Prices stay high
(b) Prices match the cost of production
(c) Prices always drop
(d) Prices are unpredictable
Answer: (b) Prices match the cost of production

114. What is a cartel?

(a) A group of firms working together to raise prices
(b) A single firm setting the market price
(c) A firm lowering prices aggressively
(d) A group of consumers bargaining together
Answer: (a) A group of firms working together to raise prices

115. What happens to profits in a monopoly?

(a) They are usually high
(b) They are usually zero
(c) They are always low
(d) They are unpredictable
Answer: (a) They are usually high
116. What is product differentiation?
(a) Making a product exactly like competitors
(b) Making a product seem unique to consumers
(c) Selling products at lower prices
(d) Producing goods faster
Answer: (b) Making a product seem unique to consumers

117. What is an example of a natural monopoly?

(a) A utility company providing electricity
(b) A clothing retailer with many brands
(c) A market with no barriers to entry
(d) A technology company facing high competition
Answer: (a) A utility company providing electricity

118. What happens in monopolistic competition when new firms enter the market?
(a) Profits increase for existing firms
(b) Profits decrease for existing firms
(c) Costs for firms increase
(d) Existing firms leave immediately
Answer: (b) Profits decrease for existing firms

119. What is the impact of advertising on monopolistic competition?

(a) Increases customer loyalty
(b) Eliminates competition
(c) Reduces costs
(d) Prevents new firms from entering
Answer: (a) Increases customer loyalty

120. In perfect competition, firms sell:

(a) Identical products
(b) Unique products
(c) Patented products
(d) High-priced products
Answer: (a) Identical products

121. Which market structure allows a firm to set its own price for a product?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: B) Monopoly

122. Dynamic pricing is most likely used in which market structure?

A) Monopoly
B) Perfect competition
C) Oligopoly
D) Monopolistic competition
Answer: C) Oligopoly

123. Brand loyalty is a significant feature of which market structure?

A) Monopoly
B) Monopolistic competition
C) Perfect competition
D) Oligopoly
Answer: B) Monopolistic competition

124. In which market structure does the firm face a downward-sloping demand curve?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: B) Monopoly

125. Perfect information among buyers and sellers is assumed in which market structure?
A) Monopoly
B) Monopolistic competition
C) Perfect competition
D) Oligopoly
Answer: C) Perfect competition

126. In which market structure do firms consider the actions of competitors when making
decisions?
A) Monopoly
B) Oligopoly
C) Perfect competition
D) Monopolistic competition
Answer: B) Oligopoly

127. A contestable market is one where:

A) There are no barriers to entry or exit.
B) Firms always make a profit.
C) Demand is perfectly elastic.
D) Supply is perfectly elastic.
Answer: A) There are no barriers to entry or exit.

128. Cross-price elasticity is most significant in analyzing competition between firms in

which structure?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: D) Oligopoly

129. Which market structure is characterized by a few dominant firms controlling the
majority of the market share?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: D) Oligopoly
130. Why are cartels difficult to maintain in the long run?
A) Firms cannot agree on pricing.
B) Government regulations break them up.
C) Individual firms have an incentive to cheat.
D) Consumers refuse to buy.
Answer: C) Individual firms have an incentive to cheat.
131. Which market structure features non-homogeneous products?
A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) Oligopoly
Answer: B) Monopolistic competition

132. A price maker is a firm that:

A) Accepts the market price.
B) Sets its price based on marginal cost.
C) Can influence the market price due to its market power.
D) Has no competitors.
Answer: C) Can influence the market price due to its market power.

133. In which market structure are firms most likely to differentiate their products through
advertising and branding?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: C) Monopolistic competition

134. Price leadership is most commonly observed in which market structure?

A) Monopoly
B) Monopolistic competition
C) Oligopoly
D) Perfect competition
Answer: C) Oligopoly

135. Competitive pricing is most likely in which market structure?

A) Monopoly
B) Monopolistic competition
C) Perfect competition
D) Oligopoly
Answer: C) Perfect competition

136. Excess capacity is commonly associated with which market structure?

A) Monopoly
B) Monopolistic competition
C) Oligopoly
D) Perfect competition
Answer: B) Monopolistic competition

137. In which market structure are firms most likely to produce at a quantity where price
exceeds marginal cost in the long run?
A) Monopoly
B) Monopolistic competition
C) Perfect competition
D) Oligopoly
Answer: B) Monopolistic competition

138. When a monopoly is regulated, the government aims to:

A) Increase profits for the monopoly.
B) Protect consumer interests by controlling price and output.
C) Prevent the monopoly from advertising.
D) Encourage market entry by new firms.
Answer: B) Protect consumer interests by controlling price and output.

139. Marginal cost pricing is most likely in which market structure?

A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition
Answer: A) Perfect competition

140. Economies of scale are most beneficial to firms in which market structure?
A) Monopoly
B) Oligopoly
C) Perfect competition
D) Monopolistic competition
Answer: A) Monopoly

141. Which market structure is least likely to allow firms to earn supernormal profits in the
long run?
A) Monopoly
B) Perfect competition
C) Oligopoly
D) Monopolistic competition
Answer: B) Perfect competition

142. What is a cartel?

A) A group of firms that compete to increase output and lower prices
B) A group of firms that collude to restrict output and raise prices
C) A group of firms that merge to form a single firm
D) A group of firms that cooperate to develop new products
Answer: B) A group of firms that collude to restrict output and raise prices

143. In an oligopoly, firms often:

A) Compete fiercely on price
B) Cooperate to set prices or output
C) Have no impact on each other's decisions
D) Easily enter and exit the market
Answer: B) Cooperate to set prices or output
144. What is the key difference between a monopoly and an oligopoly?
A) Number of sellers
B) Product differentiation
C) Barriers to entry
D) Level of competition
Answer: A) Number of sellers
145. If a company has a patent on a new product, this creates a barrier to entry. True or False?
A) True
B) False
Answer: A) True

146. Which market structure is most likely to feature collusion?

A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition
Answer: C) Oligopoly

147. In monopolistic competition, what happens to profits in the long run?

A) They remain high due to barriers to entry.
B) They decrease to zero due to new entrants.
C) They increase indefinitely.
D) They depend on advertising.
Answer: B) They decrease to zero due to new entrants.

148. A firm in perfect competition is a:

A) Price maker
B) Price taker
C) Monopoly
D) Cartel member
Answer: B) Price taker

149. In which market structure is advertising most significant?

A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
Answer: C) Monopolistic competition
150. Which market structure has the highest level of competition?
A) Monopoly
B) Monopolistic competition
C) Oligopoly
D) Perfect competition
Answer: D) Perfect competition