05-01-2022

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Pricing Under Various forms of Market.

Q 1 :- Which of the following types of competition is just a theoretical economic concept, not a realistic case
where actual competition and trade take place?

(a) Monopoly (b) Oligopoly (c) Perfect Competition (d) Monopolistic Competition
 Perfect competition is a type of market where there are huge number of buyers and sellers who deals in the
same type of product due to which no individual unit is able to influence the price of the product and the
seller have to quote the price that prevails in the market which usually remains uniform due to such large
involvement of the masses.
Q 2 :- The market for Food grains, Cereals, Vegetables, etc. closely resembles —

(a) Perfect Competition (b) Monopoly (c) Monopolistic Competition (d) Oligopoly.

 Railways is an example of Monopoly

 Mobile Phone Service Providers is an example of Oligopoly
 Toothpaste Manufacturing Industry is an example of Monopolistic Competition

Q 3 :- Which of the following is not a characteristic feature common to both Monopolistic Competition and Perfect
Competition?
(a) Many Buyers and Sellers (b) Identical Products
(c) Easy entry and exit of Firms (d) Firms take other Firms' prices as given
Q 4 :- In which of the following market structures is the demand curve of the market is represented by the
demand curve of the Firm?
(a) Monopolistic competition (b) Perfect Competition (c)Monopoly (d) Oligopoly
 Demand Curve of the Market in Monopoly is represented by the Demand Curve of the Firm because there is
only one Firm in the market
Q 5 :- Which among the following market structures has the highest product differentiation?

(a) Pure or Perfect Competition (b) Monopolistic Competition (c) Oligopoly (d) Monopoly
Q 6 :- Which among the following market structures has the highest price elasticity?

(a) Pure or Perfect Competition (b) Monopolistic Competition

(c) Oligopoly (d) Monopoly
Q 7 :- Which of the following market forms will never suffer losses in the short run?

(a) Perfect Competition (b) Oligopoly (c) Monopoly (d) None of these

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Q 8 :- In which form of the market structure is the degree of control over the price of its product by a Firm very
large .
(a) Monopoly (b) Imperfect Competition ( c) Oligopoly (d) Perfect Competition
 In a Perfect Competitive forms of market structure, Firm has no control over the price of its product.
 Monopoly is the exact opposite of Perfect Competition
Q 9 :- Which of the following statements is incorrect?

(a) Even Monopolist can earn losses

(b) Firms in a perfectly competitive market are Price Takers.
(c) It is always beneficial for a Firm in a Perfectly Competitive Market to discriminate prices.
(d) Kinked demand curve is related to an Oligopolistic Market.
Q 10 :- Market situation in which there are only two Firms in the market

(a) Monopsony (b) Bilateral Monopoly (c) Duopoly (d) Oligopoly

 A bilateral monopoly exists when a market has only one supplier and one buyer.
 A monopsony means there is one buyer and many sellers.
 A duopoly is a type of oligopoly where two firms have dominant or exclusive control over a market.
 An oligopoly is a market structure in which a market or industry is dominated by a small number of
large sellers or producers.

Q 11 :- Which of the following is not true about perfect competition?

(a) Purchase and sale of homogeneous goods (b) Mobility of factors of production
(c) Free entry and exit (d) Presence of advertisement

Q 12 :- In a perfect competition, who set the prices:

( a ) Buyers ( b ) Sellers ( c ) Both buyers and sellers ( d ) Government

 Price is determined by the intersection of market demand and market supply; individual firms do
not have any influence on the market price in perfect competition.

Q 13 :- The assumptions of large number of Sellers and product homogeneity in Perfect Competition, implies
that all individual Firms in Perfect Competition are

(a) Price Movers (b) Price Givers (c) Price Maker (d) Price Takers

Q 14 :- The conditions of Firm Equilibrium, i.e. MC = MR, and MC cuts MR from below, is applicable for —

(a) Perfect Competition (b) Monopoly (c) Monopolistic Competition (d) All of the above.

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Q 15 :- Which of the following statements about Average Revenue (AR) and Marginal Cost (MC) in
competitive and monopolized markets is true?

(a) In Competitive Markets, AR = MC; in monopolized Markets, AR > MC.

(b) In Competitive Markets, AR = MC; in Monopolized Markets, AR = MC.
(c) In Competitive Markets, AR > MC; in Monopolized markets, AR > MC.
(d) In Competitive Markets, AR > MC; in Monopolized markets, AR = MC.

Q 16 :- In which of the following types of market structures can a Firm earn abnormal profits in the long run?

(a) Perfect Competition (b) Monopolistic competition (c) Monopoly d) None of the above

Q 17 :- Under Perfect Competition, Price Elasticity of Demand is

(a) Unitary Elastic (b)Less Elastic (c) More Elastic d) Perfectly Elastic
Q 18 :- Which of the following market situations explains Marginal Cost equal to
Price for attaining equilibrium?
(a) Perfect Competition
(b) Monopoly
(c) Oligopoly
(d) Monopolistic Competition

Perfect Competition
 Equilibrium -MC = AR=MR = Minimum AC Monopoly
 Demand Curve is also the Firm's Average Revenue Curve

 Under monopoly AR falls, as more units of output are sold,

 The MR lies below the AR curve (MR<AR).
 The monopolist will continue to sell his product as long as his MR>MC.
 He attains equilibrium at the level of output when its MC = MR. Beyond this point, the
producer will experience loss and hence will stop selling

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Q 19 :- Under Perfect Competition, in the short—run, the condition AR = MR = MC = AC, means that the Firm is
earning —
(a) Normal Profits only (b) Super Normal Profits (c) Losses (d) All of the above.
 Under Perfect Competition, in the short—run, if AR > AC at the point when MC = MR, it means that the Firm is
earning Super Normal Profits

Q 20 :- If the price falls below the Minimum Average Variable Cost, a Firm operating under Perfect Competition
should, in the short run,
(a) Produce an output where MR = MC (b) Reduce its output so as to increase the price and profits
(c) Stop production until price increases (d) Continue to produce in the short run, but not in long run

Q 21 :- In a perfectly competitive markets, if MR is greater than MC then a firm should—

(a) Increase its production

(b) Decrease its production
(c) Stop production (output) until price increases
(d) Decrease in sales

Q 22 :- Which of the following Degrees of Price Discrimination is known as Imperfect Discriminating

Monopoly ?
(a) First degree price discrimination
(b) Second degree price discrimination
(c) Third degree price discrimination
(d) Dumping
Q 23 :- Under Monopoly, the Firm's Demand
Curve is
(a) Horizontal Line, parallel to X Axis
(b) Vertical Line, parallel to Y Axis
(c) Negatively Sloped
(d) Kinked.
 First degree price discrimination A monopolist charges the
maximum price that a buyer is willing to pay. This is called as
“Perfect Discriminating Monopoly”
 Second degree price discrimination Under this degree, buyers
are charged prices in such a way that a part of their consumer’s
surplus is taken away by the sellers. This is called as “Imperfect
Discriminating Monopoly”.
 Under this degree, buyers are divided into different groups and
a different price is charged for each group.
 Third degree price discrimination The monopolist splits the
entire market into a few sub-market and charges different price
in each sub-market. The groups are divided on the basis of age,
sex and location.

 Dumping refers to practice of the monopolist charging higher

price for his product in the local market and lower price in the
foreign market.

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Q 24 :- In Monopoly, the relationship between Average and Marginal Revenue

Curves is as follows:

(a) AR Curve lies above the MR Curve.

(b) AR Curve coincides with the MR Curve.
(c) AR Curve lies below the MR Curve.
(d) AR Curve is parallel to the MR Curve.

Q 25 :- The degree of Monopoly Power is measured in terms of difference between —

(a) Marginal Cost and Price
(b) Average Cost and Average Revenue
(c) Marginal Cost and Average Cost
(d) Marginal Revenue and Average Cost
 The degree of monopoly power is measured in terms of
difference between Marginal cost and the price.
 In a perfectly competitive market, price equals marginal
cost and firms earn an economic profit of zero

Q 26 :- Which of the following is not the characteristic of Monopoly?

(a) Many Buyers

(b) Heterogeneous Products
(c) Free Entry of new Firms
(d) Both b & c

Q 27 :- Equilibrium Price of a Monopolist is —

 The conditions of
Firm Equilibrium, i.e.
(a) Less than Marginal Cost (b) Equal to Marginal Cost
MC = MR, and MC
cuts MR from below,
(c) Equal to Marginal Revenue (d) More than Marginal Cost

Q 28 :- If Marginal Revenue exceeds Marginal Cost, a

Monopolist should —

(a) increase output.

(b) decrease output.

(c) keep output the same because profits are maximized

when Marginal Revenue exceeds Marginal Cost.

(d) raise the price.

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Q 29 :- Under Price Discrimination, the Producer Firm may charge lower prices from a market, if Price Elasticity (e)

(a)e=1 (b)e<1 (c)e>1 (d)e=0

Q 30 :- For price discrimination to be successful, the elasticity of demand for the commodity in the two markets,
should be:
( a ) Same ( b ) different ( c ) Constant ( d ) Zero

Q 31 :- Product Differentiation in a Monopolistic Competition could lead to —

(a) Horizontal Demand Curve

(b) Downward Sloping Demand Curve
(c) Vertical Demand Curve
(d) Downward sloping supply curve

Q 32 :- Under Monopolistic Competition, in the short—run, if AR < AC at the point when MC = MR, it means that
the Firm —

(a) Normal Profits only (b) Super Normal Profits (c) Losses (d) All of the above.

Q 33 :- Under Oligopoly, the Firm's Demand Curve is —

(a) Horizontal Line, parallel to X Axis (b) Vertical Line, parallel to Y Axis
(c) Negatively Sloped (d) Kinked.
Q 34 :- When an Oligopolistic Firm changes its price, its rival Firms —

(a) will retaliate or react and change their prices

(b) will not react at all
(c) will exit the market The curve is more
(d) will appeal to the Government elastic above the kink
Q 35 :- As per Kinked Demand Curve Theory of Oligopoly, the demand above the Kink is and less elastic
below it.
(a) more elastic (b) less elastic (c) unit elastic (d) zero elastic
Q 36 :- Which market is characterized by competition among the few firms producing differentiated products?
JSA 2021
(A) Monopolistic competition (B) Differentiated oligopoly (C) Perfect competition D) Pure oligopoly
 In the case of pure oligopoly, the product of different firms in the industry is identical or
homogeneous while in the case of differentiated oligopoly, the products of different firms are not
identical but rather differentiated products.

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Q 37 :- Under ______, there is a large number of firms producing a homogeneous product. JSA 2021

(A) differentiated oligopoly (B) perfect competition (C) pure oligopoly (D) monopoly

Q 38 ;- In the basic model of a market economy we assume that there exists ______ markets. JSA 2021

(A) monopoly (B) duopoly (C) competitive (D) oligopoly

Q 39 :- ______ refers to the minimum income which the entrepreneur must get in order to stay in a business or
industry. JSA 2021

(A) Abnormal profits (B) Economic profits (C) Normal profits (D) Super-normal profits

Q 40 :- Which market is characterized by a large number of firms and product differentiation? JSA 2021

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

Q 41 : Under perfect competition, as output is total revenue goes on increasing at ______. JSA 2021

(A) a decreasing rate (B) an increasing rate (C) a constant rate (D) a negative rate

Q 42 ;- Under ______, there is competition among the few firms producing homogeneous or identical product.
JSA 2021

(A) monopolistic competition

(B) differentiated oligopoly

1-c 2-a 3-b 4-c 5-d 6-a 7-d
8-a 9-c 10- c 11-d 12-c 13-d
(C) perfect competition
14-d 15-a 16-c 17-d 18-a 19-a
(D) pure oligopoly
20-c 21-a 22-b 23-c 24-a 25-a
Q 43 :- Which factor conveys information to the firms about 26-c 27-d 28-a 29-c 30-b 31-b
how individuals value different goods and services? JSA
2021 32-c 33-d 34-a 35-a 36-b 37-b
(A) Inequality 38-c 39-c 40-b 41-c 42-d 43-b
(B) Prices
(C) Incentives
(D) Profits