Profit Maximizing Under Perfect Competition & Monopoly Mcqs - Set 1

1)   In contestable markets large oligopolistic firms end up behaving like ?

a. monopolistically competitive firms
b. a cartel
c. perfectly competitive firms
d. a monopoly.
Answer  Explanation 

ANSWER: monopolistically competitive firms

Explanation:
No explanation is available for this question!


2)   A market is defined as perfectly contestable if ?

a. entry to it and exit from it are both costless
b. entry to it and exit from it are both costly
c. entry to it costless, but exit from it is costless
d. entry to it is costly, but exit from it is costless
Answer  Explanation 

ANSWER: entry to it and exit from it are both costless

Explanation:
No explanation is available for this question!


3)   The kinked demand curve model of oligopoly assumes the elasticity of demand ?

a. in response to a price increase is less elastic than the elasticity of demand in response to a price decrease
b. is perfectly elastic if price increases and perfectly inelastic if price decreases
c. is constant regardless of whether price increase of decrease.
d. in response to a price increases is more elastic than the elasticity of demand in response to a price decrease
Answer  Explanation 

ANSWER: in response to a price increases is more elastic than the elasticity of demand in response to a price decrease

Explanation:
No explanation is available for this question!


4)   In which of the following circumstances would a cartel be most likely to work ?

a. The market for copper, where there are very few producers and the product is standardized.
b. The fast-food market where there are a large number of producers but the demand for fast food is inelastic
c. The coffee market where the product is standardized and there are a large number of coffee growers.
d. The automobile industry, where there are few producers but there is great product differentiation.
Answer  Explanation 

ANSWER: The market for copper, where there are very few producers and the product is standardized.

Explanation:
No explanation is available for this question!


5)   A price- and quantity-fixing agreement is known as?

a. price leadership
b. price concentration
c. collusion
d. game theory,
Answer  Explanation 

ANSWER: collusion

Explanation:
No explanation is available for this question!


6)   An industry that has a relatively small number of firms that dominate the market is called ?

a. a colluding industry
b. a merged industry
c. a concentrated industry
d. a natural monopoly
Answer  Explanation 

ANSWER: a concentrated industry

Explanation:
No explanation is available for this question!


7)   A form of industry structure characterized by a few firms, each large enough to influence market price is ?

a. perfect competition
b. monopolistic competition
c. oligopoly
d. monopoly
Answer  Explanation 

ANSWER: oligopoly

Explanation:
No explanation is available for this question!


8)   Which of the following statements best describes the outcome under monopolistic competition ?

a. It is efficient because the right amount of output is produced, but not efficient in that the output produced is produced at a cost above minimum aver
b. It is efficient because entry is free and economic profits are eliminated in the long run.
c. It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost
d. It is not efficient because too little output is produced but is efficient in that the output produced is produced at minimum average total cost.
Answer  Explanation 

ANSWER: It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost

Explanation:
No explanation is available for this question!


9)   A firm in a monopolistically competitive industry ?

a. sells a fixed amount of output regardless of price.
b. must raise price to sell more output
c. can sell an infinite amount of output at the market-determined price
d. must lower price to sell more output.
Answer  Explanation 

ANSWER: must lower price to sell more output.

Explanation:
No explanation is available for this question!


10)   In monopolistic competition firms achieve some degree of market power ?

a. by producing differentiated products
b. because of barriers to exit from the industry
c. by virtue of size alone
d. because of barriers to entry into the industry
Answer  Explanation 

ANSWER: by producing differentiated products

Explanation:
No explanation is available for this question!