Deck 13: Competitive and Monopolistic Markets

Question 1

If price is greater than average cost, in the short-run, the competitive firm can earn

A)Normal profit
B)Super normal profit
C)Loss
D)All of the above

Answer 1

Super normal profit

Question 2

If price is less than average cost, in the short-run, the competitive firm can earn

A)Normal profit
B)Super normal profit
C)Loss
D)All of the above

Answer 2

Loss

Question 3

Break-even point is a point where price is equal to

A)AC
B)AVC
C)AFC
D)MC

Answer 3

AC

Question 4

Shut-down point is a point where price is equal to

A)AC
B)AVC
C)AFC
D)MC

Question 5

In the long run, a competitive firm can earn

A)Normal profit
B)Super normal profit
C)Loss
D)Any of the above

Question 6

The importance of time element in price determination was firstly analyzed by

A)Adam smith
B)Alfred Marshall
C)David Ricardo
D)J M Keynes

Question 7

In the short-period,

A)All factors are fixed
B)Some factors are fixed and others are variable
C)All factors are variable
D)None of the above

Question 8

In the long-period,

A)All factors are fixed
B)Some factors are fixed and others are variable
C)All factors are variable
D)None of the above

Question 9

At the optimum short-run level of output, the firm will be

A)Maximizing total profit
B)Minimizing total losses
C)Either maximizing total profit or minimizing total losses
D)Maximizing profit per unit

Question 10

When the perfectly competitive firm and industry are both in long run equilibrium

A)P = MR = SMC = LMC
B)P = MR = SAC = LAC
C)P = MR =Lowest point on the LAC curve
D)All of the above

Question 11

The theory of monopolistic competition was popularized by

A)Marshall
B)Keynes
C)Chamberlin
D)Pigou

Question 12

A monopolistically competitive market is distinguished from perfect competition by the fact that

A)Few sellers
B)It has few buyers
C)It deals with differentiated products
D)None of the above

Question 13

Excess capacity is a hallmark of

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

Question 14

Monopolistically competitive firms

A)Are small in size
B)Have small share in the market
C)Are large in the size
D)Both A and B

Question 15

Selling cost assumes paramount importance in

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)None of the above

Question 16

Under monopolistic competition, there can be freedom of entry in the sense that there is freedom to produce

A)Close substitutes
B)Perfect substitutes
C)Complements
D)None of the above

Question 17

A firm under monopolistic competition advertise because

A)To compete successfully with rival
B)To lower cost of production
C)To increase revenue and sales
D)Since it cannot raise price

Question 18

In the case of monopolistic competition,

A)Short run supply curve cannot be defined
B)MR curve cannot be defined
C)AR curve cannot be defined
D)None of the above

Question 19

Under monopolistic competition, super normal profit arise when

A)AR=AC
B)MR=MC
C)AR>AC
D)AR

Question 20

Which of the following condition are met in the long run equilibrium of the monopolistic competitor earning only normal profit

A)MC=AC
B)P=AC
C)P=MR
D)P=MC

Question 21

The term group equilibrium is referred to

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

Question 22

Increase or decrease in the level of production by a monopolistically competitive firm have ------- impact on price and output decisions of other firms

A)Very significant
B)Significant
C)Small
D)Negligible

Question 23

Monopolistic competitive firm fixes the price of its product

A)Independent of the price of close substitutes
B)Close to the prices of close substitutes
C)At a very high level
D)None of the above

Question 24

Under monopolistic competition, an increase in the number of firms producing close substitutes will make the demand curve of each firm

A)Inelastic
B)Elastic
C)Downward sloping
D)Perfectly inelastic