#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
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationAll products are identical with no differentiation.
#7
What is a key feature of monopolistic competition?
Product differentiation
ExplanationProducts are differentiated to some extent to create a perceived difference.
#8
Which market structure typically has the highest degree of product differentiation?
Monopolistic competition
ExplanationCharacterized by the most diverse range of products.
#9
Which of the following is a characteristic of a monopoly?
Barriers to entry
ExplanationEntry into the market is restricted due to various barriers.
#10
Which market structure is characterized by a few interdependent firms?
Oligopoly
ExplanationA market dominated by a small number of large firms.
#11
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.
#12
Which of the following is NOT a characteristic of monopolistic competition?
Price taker
ExplanationFirms have some control over price due to product differentiation.
#13
Which of the following is a barrier to entry in a monopolistic market?
High economies of scale
ExplanationLarge-scale production necessary to achieve efficiency.
#14
What is a characteristic of an oligopoly market structure?
Few firms with differentiated products
ExplanationA small number of firms offering diverse products.
#15
In which market structure do firms have the highest degree of market power?
Monopoly
ExplanationOne firm dominates the market, controlling prices and output.
#16
What is the key feature of a monopolistically competitive market?
Many sellers with differentiated products
ExplanationNumerous firms offering products with perceived differences.
#17
What is the primary factor that drives firms in a monopolistic competition to differentiate their products?
Attracting customers away from rivals
ExplanationTo gain a competitive edge and increase market share.
#18
In a monopolistically competitive market, firms operate with:
Moderate market power
ExplanationSome influence over price due to product differentiation.
#19
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.
#20
What happens to equilibrium price and quantity in a perfectly competitive market when demand increases?
Price increases, quantity increases
ExplanationPrice and quantity both rise.
#21
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.
#22
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.
#23
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.
#24
Which of the following is a characteristic of a monopolistic market?
Many substitutes
ExplanationProducts have close substitutes available.
#25
What is a key difference between monopolistic competition and oligopoly?
Number of firms
ExplanationMonopolistic competition has many firms, while oligopoly has few.