#1
Which of the following is a characteristic of a competitive market?
Many buyers and sellers
ExplanationCharacterized by numerous buyers and sellers.
#2
In a perfectly competitive market, firms are:
Price takers
ExplanationThey accept the market price as given, without influencing it.
#3
What is the primary goal of firms in a competitive market?
Maximize profit
ExplanationTo achieve the highest possible profit.
#4
What is the primary reason for the existence of monopolistic competition?
Product differentiation
ExplanationTo create a perceived difference and gain market share.
#5
What is the main objective of a firm in a monopolistic competition?
Maximize profit
ExplanationTo achieve the highest possible profit.
#6
What is a key feature of monopolistic competition?
Product differentiation
ExplanationProducts are differentiated to some extent to create a perceived difference.
#7
Which market structure typically has the highest degree of product differentiation?
Monopolistic competition
ExplanationCharacterized by the most diverse range of products.
#8
Which of the following is a characteristic of a monopoly?
Barriers to entry
ExplanationEntry into the market is restricted due to various barriers.
#9
Which market structure is characterized by a few interdependent firms?
Oligopoly
ExplanationA market dominated by a small number of large firms.
#10
What does the term 'price elasticity of demand' measure?
The sensitivity of quantity demanded to a change in price
ExplanationThe responsiveness of quantity demanded to changes in price.
#11
In which market structure do firms have the least control over prices?
Perfect competition
ExplanationFirms are price takers and have no control over the market price.
#12
What happens to equilibrium price and quantity in a perfectly competitive market when demand increases?
Price increases, quantity increases
ExplanationPrice and quantity both rise.
#13
In a perfectly competitive market, what does the demand curve look like for an individual firm?
Horizontal
ExplanationPerfectly elastic, indicating that the firm can sell any quantity at the market price.
#14
What is the main reason behind the absence of economic profit in the long run in a perfectly competitive market?
Firms produce at minimum average total cost
ExplanationProfit attracts new firms until economic profit is zero.
#15
Which of the following market structures has the least control over price but significant control over quantity?
Oligopoly
ExplanationFirms can influence quantity but not price due to interdependence.