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IMPERFECT COMPETITION (15 MARKS)

1. Who coined the term ‘monopolistic competition’?

a. Marshall
b. Sweezy
c. Chamberlin
d. Stackelberg

2. The term monopolistic competition was coined in

a. 1933
b. 1943
c. 1953
d. 1963

3. The short run supply curve of the monopolist

a. Cannot by defined
b. Is the rising portion of the MC curve
c. Is the rising portion of the MC curve starting from the shut down point
d. Can be defined if factor prices remain constant

4. In case of free entry, a firm under monopolistic competition will produce at the lowest point of the long
run average cost curve
a. Always
b. Never
c. Sometimes
d. Only when there is an excess demand

5. If there are only two sellers in the market, the market is known as
a. Monopolistically competition
b. Duopoly
c. Monopsony
d. Duopsony

6. In a monopolistically competitive market

a. Few firms are selling a differentiated product
b. Few firm are selling a homogeneous product
c. Many firms selling a differentiated product
d. Many firms are selling a homogeneous product

7. Which of these features is a not a feature of the oligopoly?

a. Large number of buyers and sellers
b. Presence of homogeneous or differentiated product
c. Interdependence
d. Perfect information

8. In which of these markets we observe the problem of indeterminacy?

a. Monopoly
b. Perfect competition
c. Monopolistic competition
d. Oligopoly

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9. Conjectural variation is a special feature of

a. Monopoly
b. Perfect competition
c. Monopolistic competition
d. Oligopoly

10. In which of these markets AR curve is non-existent?

a. Monopoly
b. Perfect competition
c. Monopolistic competition
d. Oligopoly

11. The oligopoly in which homogeneous products are sold is know as

a. Pure oligopoly
b. Differentiated oligopoly
c. Competitive oligopoly
d. Collusive oligopoly

12. Non-collusive oligopoly refers to the oligopoly in which the firms

a. Have no understanding
b. Have understanding among themselves
c. Are interdependent
d. Are dependent

13. Cournot’s model was developed in

a. 1988
b. 1838
c. 1888
d. 1938

14. Bertrand’s model was developed in

a. 1988
b. 1883
c. 1888
d. 1938

15. The kinked demand curve model was developed by

a. Cournot
b. Bertrand
c. Stackelberg
d. Sweezy

16. In which of these markets there is no excess capacity in the long run?
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. None of the above

17. The kinked demand curve model was developed in

a. 1929
b. 1939
c. 1888
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d. 1838

18. The name of Fellner is associated with

a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly

19. Cable operator’s association is an example of

a. Cartel
b. Non-collusive oligopoly
c. Pure monopoly
d. Pure oligopoly

20. Imperfect competition implies

a. Monopolistic competition
b. Oligopoly
c. Monopoly
d. All (a), (b), and (c)

21. Which of these is not a feature of monopolistic competition?

a. Presence of perceived and proportional demand curve
b. Presence group equilibrium
c. Presence of selling cost
d. Presence of product homogeneity

22. Selling cost is incurred by the monopolist

a. To increase the cost
b. For sales promotion and advertisement
c. In order to increase the AVC
d. In order to increase the fixed cost

23. If an oligopoly firm incurs losses in the short run

a. It will never stay in the business
b. It will stay in the business
c. It will break even
d. Any of the above is possible

24. The long run equilibrium of a firm under monopolistic competition is characterized by
a. Supernormal profit
b. Excess capacity and efficiency loss
c. Losses
d. Existence of fixed cost

25. In the long run

a. Monopolistically competitive price is greater than perfectly competitive price and
monopolistically competitive output is lesser than perfectly competitive output.
b. Monopolistically competitive price is lesser than perfectly competitive price and
monopolistically competitive output is greater than perfectly competitive output.
c. Monopolistically competitive price is greater than perfectly competitive price and
monopolistically competitive output is equal to perfectly competitive output.

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d. Monopolistically competitive price is lesser than perfectly competitive price and

monopolistically competitive output is equal to perfectly competitive output.

26. Which of the statements about monopolistic competition is true?

a. AR and MR are downward sloped
b. AR and MR are horizontal and equal
c. AR and MR are positively sloped
d. AR and MR are equal and negatively sloped

27. In which of these markets the seller operates at the elastic portion of the demand curve?
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Both monopoly and monopolistic competition

28. In oligopoly we find different models because of

a. Non-existent AR curve
b. Indeterminacy in the equilibrium
c. Difference in the reaction of the rivals
d. Existence of the selling cost

29. The market in which the firm have understanding among themselves is known as
a. Natural monopoly
b. Pure monopoly
c. Collusive oligopoly
d. Non-collusive oligopoly

30. The similarity between Cournot’s model and Bertrand’s model in the fact
a. That both are duopoly models
b. That both are price leadership models
c. That in both of the cases demand curve is non-existent
d. That in both of the cases there is understanding among the firms

31. If the demand curve has a kink, what will be the shape of the MR curve?
a. MR curve will be horizontal
b. MR curve will be vertical
c. MR curve will be discontinuous
d. MR curve will be negatively sloped

32. Non-price competitions and joint profit maximizations are the variations of
a. Non-collusive oligopoly
b. Collusive oligopoly
c. Monopoly
d. Monopolistic competition

33. When the existing oligopolists in a market follow a reputed firm, it is known as
a. Barometric price leadership
b. Low cost firm price leadership
c. Dominant firm price leadership
d. Simple price leadership

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34. Which one of the following is not the feature of monopolistic competition?
a. Product differentiation
b. Possibility of free entry and exit
c. Homogenous product
d. Presence of selling cost

35. In oligopoly market, the shape of the demand curve of a firm is?
a. Downward
b. Horizontal
c. Vertical
d. Intermediate

36. If the demand curve has a kink, what will the shape of the MR curve in Sweezy’s model?
a. MR curve will be horizontal
b. MR curve will be vertical
c. MR curve will be discontinuous
d. MR curve will be positively sloped

37. In monopolistic competition, the existence of excess production capacity arises because in thelong-
run firm produces at:
a. The rising part of LAC
b. The minimum point of LAC
c. Falling part of LAC
d. The minimum point of LMC

38. One important example of Cartel is

a. The Organization for Economic Cooperation & Development (OECD)
b. The Organization of the Petroleum Exporting Countries (OPEC)
c. Indian railways
d. International Monetary Fund (IMF)

39. In Sweezy’s kink demand curve model price is

a. Variable
b. Rigid
c. Less than MC
d. Greater than AC

40. A monopolistic competitive firm in the long-run equilibrium earns

a. Super normal profit
b. Normal profit
c. Negative profit
d. Either super normal profit or negative profit

41. Which of the following types of profit is considered to be a part of the cost of production?
a. Supernormal profit
b. Normal profit
c. Monopoly profit
d. Oligopoly profit

42. For a firm in monopolistic competition

a. perceived demand curve is the real demand curve
b. proportional demand curve is constructed on the basis of perception
c. perceived demand curve is much more elastic than the proportional demand curve
d. perceived demand curve is much more inelastic than the proportional demand curve

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43. Which one is true for a long run equilibrium of a firm under monopolistic competition?
a. P = LAC > LMC = MR, LAC is not minimum and LMC is rising
b. P = LAC > LMC = MR, LAC is minimum and LMC is rising
c. P = LAC < LMC = MR, LAC is not minimum and LMC is rising
d. P = LAC < LMC = MR, LAC is not minimum and LMC is falling

44. Point out the wrong statement:

a. Monopolistic competition is a mixture of monopoly and perfect competition
b. Duopoly market is a market of two sellers
c. Oligopoly market is a market of few buyers
d. None of the above

45. Which of the following is the feature of Oligopoly market?

i. Few sellers and many buyers
ii. Barriers to entry of new firms
iii. Indeterminate demand curve
iv. No selling cost
a. Only (i)
b. (i), (ii) and (iii)
c. (i), (ii) and (iv)
d. All

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