MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO PRICING OF PRODUCTS UNDER DIFFERENT MARKET CONDITIONS: PERFECT AND IMPERFECT COMPETITION, MONOPOLY
In a monopolistic competition market, firms differentiate their products through:
A) Offering lower prices than competitors
B) Advertising and branding
C) Government subsidies
D) Colluding with other firms
Answer: B) Advertising and branding
Which market structure is characterized by a few large firms dominating the market and engaging in non-price competition?
A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition
Answer: C) Oligopoly
Which of the following is NOT a characteristic of perfect competition?
A) Homogeneous products
B) Many buyers and sellers
C) Firms have some control over price
D) Free entry and exit of firms
Answer: C) Firms have some control over price
In a perfectly competitive market, firms earn zero economic profits in the long run because:
A) Prices are set by government regulations
B) Firms have full control over the market
C) There are barriers to entry and exit
D) New firms enter the market until profits are driven to zero
Answer: D) New firms enter the market until profits are driven to zero
Which of the following is an example of a natural monopoly in India?
A) Automobile manufacturing
B) Electricity distribution
C) Smartphone production
D) Clothing retail
Answer: B) Electricity distribution
What is the primary determinant of price in a perfectly competitive market?
A) Sellers’ production costs
B) Government regulations
C) Sellers’ advertising efforts
D) Buyers’ preferences
Answer: A) Sellers’ production costs
Which market structure often results in excess capacity and product differentiation?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
Under which market structure does a single firm have the power to influence the market price?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
In India, which organization regulates pricing policies in the banking sector?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Securities and Exchange Board of India (SEBI)
D) Ministry of Finance
Answer: A) Reserve Bank of India (RBI)
Which market structure is characterized by interdependent decision-making among a small number of large firms?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: C) Oligopoly
In a monopolistic competition market, firms may engage in non-price competition by:
A) Offering discounts and rebates
B) Raising prices above market equilibrium
C) Reducing the quality of their products
D) Differentiating their products through branding and advertising
Answer: D) Differentiating their products through branding and advertising
Which market structure is least likely to produce allocative efficiency?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
Which regulatory body in India oversees fair trade practices and prevents anti-competitive behavior?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Securities and Exchange Board of India (SEBI)
D) Ministry of Corporate Affairs
Answer: B) Competition Commission of India (CCI)
Which market structure is characterized by a single seller with no close substitutes?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
What is the key feature of a perfectly competitive market?
A) High barriers to entry
B) Price-setting power of individual firms
C) Product differentiation
D) Many buyers and sellers trading identical products
Answer: D) Many buyers and sellers trading identical products
Which market structure is most likely to lead to the highest level of consumer surplus?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: A) Perfect competition
In a monopolistic competition market, how do firms differentiate their products?
A) By offering lower prices than competitors
B) By producing identical products
C) By engaging in price wars
D) By product branding and advertising
Answer: D) By product branding and advertising
Which of the following is an example of a monopoly in India?
A) Smartphone market
B) Grocery stores
C) Indian Railways
D) Local vegetable vendors
Answer: C) Indian Railways
Which market structure is characterized by a few sellers offering differentiated products?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
Which of the following is a barrier to entry in a monopoly market?
A) Homogeneous products
B) Government regulations
C) Many sellers
D) Free entry and exit of firms
Answer: B) Government regulations
In India, which regulatory body ensures fair competition in the telecom sector?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Telecom Regulatory Authority of India (TRAI)
D) Ministry of Information and Broadcasting
Answer: C) Telecom Regulatory Authority of India (TRAI)
Which market structure is most conducive to product innovation and development?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: C) Oligopoly
What type of market structure is characterized by a high degree of interdependence among firms?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: C) Oligopoly
Which market structure tends to have the highest barriers to entry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
In a monopolistic competition market, what happens to firms in the long run?
A) They earn supernormal profits.
B) They produce at the minimum efficient scale.
C) They earn zero economic profits.
D) They exit the market due to losses.
Answer: C) They earn zero economic profits.
Which market structure has the most significant degree of market power?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
In India, which regulatory body monitors unfair trade practices and market dominance?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Securities and Exchange Board of India (SEBI)
D) Ministry of Commerce and Industry
Answer: B) Competition Commission of India (CCI)
Which market structure is characterized by few sellers offering homogeneous products?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: C) Oligopoly
Which of the following is a characteristic of monopolistic competition?
A) Many sellers offering identical products
B) A single seller with complete control over the market
C) Product differentiation
D) Identical products with no differentiation
Answer: C) Product differentiation
In India, which market structure is most common in the fast-food industry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
Which market structure is characterized by a high degree of product differentiation?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
In a perfectly competitive market, what happens if a firm earns economic profits in the short run?
A) New firms enter the market, driving prices up.
B) Existing firms exit the market, driving prices down.
C) The government imposes price controls.
D) The firm’s demand curve shifts to the left.
Answer: A) New firms enter the market, driving prices up.
Which market structure is characterized by strategic pricing decisions?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: C) Oligopoly
In a perfectly competitive market, what happens if a firm produces below the equilibrium output level?
A) It earns supernormal profits.
B) It faces government intervention.
C) It incurs losses.
D) It faces no consequences.
Answer: C) It incurs losses.
Which market structure tends to have the lowest barriers to entry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: A) Perfect competition
In India, which regulatory body ensures fair competition in the aviation sector?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Directorate General of Civil Aviation (DGCA)
D) Ministry of Civil Aviation
Answer: C) Directorate General of Civil Aviation (DGCA)
Which market structure is most likely to lead to product innovation and variety?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
In a monopolistic competition market, firms differentiate their products to:
A) Lower production costs
B) Maximize economic profits
C) Create brand loyalty
D) Increase market share
Answer: C) Create brand loyalty
What is the primary goal of a firm in a perfectly competitive market?
A) Maximizing market power
B) Setting the highest possible price
C) Maximizing economic profits
D) Selling as much output as possible
Answer: D) Selling as much output as possible
In India, which market structure is most common in the retail industry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
Which market structure tends to have the most significant degree of price discrimination?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
Which market structure is characterized by differentiated products and some price-setting power?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
In India, which regulatory body monitors unfair trade practices in the pharmaceutical industry?
A) Reserve Bank of India (RBI)
B) Competition Commission of India (CCI)
C) Drugs Controller General of India (DCGI)
D) Ministry of Health and Family Welfare
Answer: C) Drugs Controller General of India (DCGI)
Which market structure tends to have the most significant barriers to entry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
In a monopolistic competition market, what happens if a firm earns economic profits in the short run?
A) New firms enter the market, driving prices down.
B) The firm faces government intervention.
C) The firm earns supernormal profits.
D) Existing firms exit the market.
Answer: A) New firms enter the market, driving prices down.
Which market structure is most likely to result in excess capacity in the long run?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
In India, which regulatory body ensures fair competition in the insurance sector?
A) Reserve Bank of India (RBI)
B) Insurance Regulatory and Development Authority of India (IRDAI)
C) Securities and Exchange Board of India (SEBI)
D) Ministry of Finance
Answer: B) Insurance Regulatory and Development Authority of India (IRDAI)
Which market structure is characterized by a high degree of market power and no close substitutes?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: D) Monopoly
What is a key feature of a monopolistic competition market?
A) Identical products
B) Many sellers with price-setting power
C) Homogeneous products
D) Product differentiation
Answer: D) Product differentiation
In India, which market structure is most common in the restaurant industry?
A) Perfect competition
B) Monopolistic competition
C) Oligopoly
D) Monopoly
Answer: B) Monopolistic competition
