ECO 415 Market Structure

CHAPTER : MARKET STRUCTURE

1) The diagram below shows the cost and revenue structures of a firm.
Price/ Cost (RM)

MC
AC

D = AR

MR

Quantity (units)
0

The firm presented in the above figure is

A. making a normal profit
B. incurring a loss, once opportunity cost is considered
C. producing at the same level of output as a purely competitive firm
D. producing a standardized product

2) Under which market structure are the conditions of entry the most difficult?
A. Pure competition.
B. Pure monopoly.
C. Oligopoly.
D. Monopolistic competition.

3) One feature of pure monopoly is that the monopolist is

A. a producer of products with close substitutes.
B. one of the several producers of a product.
C. a price taker.
D. a price maker.

4) The demand curve for a monopoly firm is also a market demand curve because
A. there is no close substitute.
B. there is barrier to enter the market.
C. the firm is the only firm in the market.
D. the firm is the price maker.

5) Which of the following is not a charateristic of a monopoly?

ECO 415 Market Structure
A. barriers to entry.
B. absence of market power.
C. ability to be a price maker.
D. absence of close substitutes.

6) When compared to competitive markets, monopoly markets tend to

A. Be more efficient in terms of resource allocation

B. Sell a larger quantity
C. Have higher prices
D. Have lower prices

7) Which of the following would best describe a monopolistic competition?

A. Thousands of firms in the industry.
B. Product standardization.
C. Collusion among firms.
D. Product Differentiation

8) For a monopolistically competitive firm, the price of its product is

A. always equal to marginal revenue.
B. always less than marginal revenue.
C. always greater than marginal revenue.
D. always equal to the average cost of production.

9) Which of the following is not a characteristic of a monopolistic competitive market?

A. Product differentiation.
B. Mutual interdependence among firms.
C. A downward sloping demand curve.
D. A relatively large number of firms.

10) A perfectly competitive firm has no influence over price because

A. it is unaware of the demand curve it faces.
B. its output is insignificant relative to the market as a whole.
C. its producers are not motivated.
D. consumers establish the price of the product.

11) When a firm is operating in a perfectly competitive market, its marginal revenue is
A. always less than price.
B. equal to zero.
C. equal to average revenue and price.
D. equal to marginal cost at every output level.
ECO 415 Market Structure

12) A perfectly elastic demand curve is a characteristic feature of

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

13) If a demand curve is perfectly elastic,

A. Marginal revenue equals marginal cost
B. Marginal revenue equal average revenue
C. Average revenue equals marginal cost
D. Average cost equals average variable cost.

14) Perfect competition is different from other market structures because

A. each firm maximises profit where marginal revenue equals marginal cost.
B. firms within the industry are making identical short run profits.
C. firms are free to leave the industry.
D. individual firm does not have the ability to influence the market price.

15) Which of the following is a unique characteristics of oligopoly?

A. Product differentiation.
B. Advertising expenditure.
C. Mutual interdependence.
D. None of the above.