MCQS

1. A firm under perfect competition will be (b) Marginal utility curve

making minimum losses (in short run) at a (c) Average revenue curve
point where (d) Average utility curve
(a) MC>MR
(b) MR>MC 9. For prices-taking firms;
(c) MC=MR (a) Marginal revenue is less than price
(d) AC=AR (b) Marginal revenue is equal to price
2. A firm under perfect competition will be (c) Marginal revenue is greater than price
making maximum profits (in short run) at (d) The relationship between marginal
a point where revenue and price is indeterminate
(a) MC>MR
(b) MR>MC 10. A monopolist is able to maximize his
(c) MC=MR profits when
(d) AC=AR (a) His output is maximum
(b) He charges high prices
3. Which of the following is not the feature (c) His average cost is minimum
of perfect competition? (d) His marginal cost is equal to marginal
(a) Large number of buyers and sellers revenue
(b) Small number of buyers and sellers 11. A firm under perfect competition is able to
(c) Free entry and free exit maximize his profits when
(d) Goods are homogeneous (a) His output is maximum
(b) He charges high prices
4. In the long run, under which competition a (c) His average cost is minimum
firm may earn super normal profits? (d) His marginal cost is equal to marginal
(a) Monopolistic competition revenue
(b) Perfect competition
(c) Oligopoly 12. In imperfect competition
(d) Monopoly (a) Excess capacity always exists
5. In the long run, under perfect competition (b) Excess capacity never exists
a firm earns; (c) Excess capacity may or may not exist
(a) Normal profit (d) None of the above
(b) Supernormal profit
(c) Losses 13. In perfect competition utilization of
(d) None of the above resources is
6. In the long run, under monopolistic (a) Partial
competition a firm earns; (b) Moderate
(a) Normal profit (c) Full
(b) Supernormal profit (d) Over
(c) Losses
(d) None of the above 14. Which of the following statement is false?
7. In the long run, under monopoly a firm (a) For equilibrium main condition is
earns; MC=MR
(a) Normal profit (b) AR curve and demand curve are same
(b) Supernormal profit (c) MC and AC curves are U shaped in every
(c) Losses market
(d) None of the above (d) None of the above

8. The demand curve is also known as 15. Product differentiation is the most
(a) Marginal revenue curve important feature of
 (a) Monopolistic competition 23. What is the MR at a point between mid
(b) Monopoly point and a point on Y axis on a straight
(c) Oligopoly line demand curve meeting two axis.
(d) Perfect competition (a) Positive
(b) Negative
16. MC=MR and MC cuts MR from below is a (c) Zero
true equilibrium condition in (d) None of the above
(a) Short run
(b) Long run 24. What is the MR at a point between mid
(c) Both in short run and long run point and a point on X axis on a straight
(d) None of the above line demand curve meeting two axis.
(a) Positive
17. MR curve under the monopoly lies between (b) Negative
AR and Y-axis because, the rate of decline (c) Zero
of the MR is (d) None of the above
(a) Just half of the rate of decline of AR
(b) Just equal to the rate of decline of AR 25. In a perfectly competitive firm, MC curve
(c) Just triple the rate of decline of the above AVC is the ____ curve of the firm
average revenue (a) Average cost
(d) Just double the rate of decline of (b) Marginal revenue
average revenue (c) Demand
(d) Supply
18. Relationship between AR, MR and price
elasticity of demand is 26. In a perfectly competitive firm, ____ curve
(a) MR = AR + [e-1/e] above AVC is the Supply curve of the firm
(b) (b) MR = AR x [e-1/e] (a) Average cost
(c) AR = MR + [e-1/e] (b) Marginal revenue
(d) MR = AR x [e/e-1] (c) Demand
19. When e = 1, then MR is; (d) Marginal Cost
(a) Positive
(b) Negative 27. In a perfectly competitive firm, MC curve
(c) Zero above ____ is the Supply curve of the firm
(d) None of the above (a) Average cost
20. When e > 1, then MR is; (b) Marginal revenue
(a) Positive (c) Demand
(b) Negative (d) Average Variable Cost
(c) Zero
(d) None of the above 28. In the long run, normal profits are included
21. When e < 1, then MR is; in the____ curve
(a) Positive (a) LAC
(b) Negative (b) LMC
(c) Zero (c) AFC
(d) None of the above (d) SAC
22. What is the MR at a mid point on a straight
line demand curve meeting two axis. 29. Price discrimination is not possible under
(a) Positive (a) Monopoly
(b) Negative (b) Monopolistic competition
(c) Zero (c) Perfect competition
(d) None of the above (d) Under any market firm
30. When_____, then we know that firms are (d) Monopoly
earning just normal profits 38. Shares traded in capital market is an
(a) AR=MR example of
(b) MC=AC (a) Oligopoly
(c) MC=MR (b) Perfect competition
(d) AC=AR (c) Monopolistic competition
31. Extreme form of Price discrimination is (d) Monopoly
possible under
(a) Monopoly 39. A purely competitive firm’s supply
(b) Monopolistic competition schedule in the short run is determined by
(c) Perfect competition (a) Its average revenue
(d) Under any market firm (b) Its marginal revenue
(c) Its marginal cost curve
32. In perfect competition in the long run (d) Marginal utility for money curve
there will be
(a) Normal profit 40. When price is less than average variable
(b) Supernormal profit cost at the profit maximizing level of
(c) Less production output, a firm should
(d) Cost will be falling (a) Shut down, since it cannot recover its
variable cost
33. In Monopolistic competition in the long run (b) Produce where MC=MR, if operating in
there will be short run
(a) Normal profit (c) Produce where MC=MR, if operating in
(b) Supernormal profit long run
(c) Less production (d) None of the above
(d) Cost will be falling
41. A firm encounters its shut down point
34. In Monopoly in the long run there will be when;
(a) Normal profit (a) Average total cost equals price at the
(b) Supernormal profit profit maximizing level of output
(c) Less production (b) Average variable cost equals price at
(d) Cost will be falling the profit maximizing level of output
(c) Average fixed cost equals price at the
35. Which of the following statement is profit maximizing level of output
correct? (d) Marginal cost equals price at the profit
(a) Monopolist can earn only profits maximizing level of output
(b) Firms in a perfectly competitive
market are price maker 42. In which forms of the market structure is
(c) Industry in a perfectly competitive the degree of control over the price of its
market is a price taker product by a firm is very large
(d) AR curve and demand curve are same (a) Imperfect competition
(b) Monopoly
36. Soap industry is an example of (c) Oligopoly
(a) Oligopoly (d) Perfect competition
(b) Perfect competition 43. In which forms of the market structure is
(c) Monopolistic competition the degree of control over the price of its
(d) Monopoly product by a firm is Nil
37. Toothpaste industry is an example of (a) Imperfect competition
(a) Oligopoly (b) Monopoly
(b) Perfect competition (c) Oligopoly
(c) Monopolistic competition (d) Perfect competition
 50. Suppose a firm is producing at a level of
44. For the price taking firm output, such that MR>MC what should be
(a) Marginal revenue is less than price the firm do to maximize profits?
(b) Marginal revenue is greater than price (a) The firm should increase output
(c) The relationship between marginal (b) The firm should do nothing
revenue and price is not clear (c) The firm should hire less labour
(d) Marginal revenue is equal to average (d) The firm should decrease the price
revenue
51. Marginal revenue is equal to
45. Under which market structure, average (a) Change in quantity divided by change
revenue of a firm is equal to its marginal in price
revenue (b) Change in price divided by change in
(a) Monopoly output
(b) Monopolistic competition (c) The change in P x Q due to a one unit
(c) Oligopoly change in output
(d) None of the above (d) None of the above

46. Which of the following is incorrect? 52. Which is not the essential condition for
(a) The shape of average cost and marginal pure competition?
cost is ‘U’ (a) Large number of buyers and sellers
(b) The AR and MR curves of a perfect (b) Homogeneous product
competition are parallel to X-axis (c) Freedom of entry
(c) At equilibrium AR=MR (d) Perfect knowledge among buyers and
(d) At equilibrium MC=MR sellers

47. A condition needed for a perfectly 53. What is the shape of AR curve faced by a
competitive industry to exist is that firm under perfect competition?
(a) Buyers are able to influence the price (a) Horizontal
of the commodity (b) Vertical
(b) Any units of commodity are considered (c) Positively sloped
by buyer to be different (d) Negatively sloped
(c) Buyers discriminate in their purchases
based on non-price factors 54. In oligopoly, the segment of the demand
(d) There are no obstacles to the free curve below the prevailing price level is
mobility of resources (a) Elastic
(b) Inelastic
48. Under which market structure, the control (c) Perfectly elastic
of the firm over price is nil? (d) Perfectly inelastic
(a) Perfect competition
(b) Monopoly 55. Which of the following is the condition for
(c) Oligopoly equilibrium of a firm?
(d) Monopolistic competition (a) AC=AR
(b) MR=AR
49. In the long run, a firm in monopolistic (c) MC=MR
competition (d) AC=MR
(a) Always earns super profits
(b) Incurs losses 56. Which of the following is not the
(c) Earns normal profit only characteristic of a price taker?
(d) May earn normal profits, super profits (a) Negatively sloped demand curve
or incur losses (b) TR = P x Q
(c) AR = Price
 (d) MR = AR
63. Shares traded in stock market depict
57. All are features of monopoly except characteristic close to
(a) There is a single seller (a) Perfect competition
(b) The firm is a price taker (b) Oligopoly
(c) The firm produces a unique product (c) Monopolistic competition
(d) The existence of some advertising (d) Monopoly

58. A monopolist is able to maximize his 64. MR curve and AR curves coincide in
profits when (a) Monopoly
(a) His output is maximum (b) Monopolistic competition
(b) He charges a higher price (c) Oligopoly
(c) His average cost is minimum (d) Perfect competition
(d) His marginal cost is equal to marginal 65. What is the price elasticity of demand in
revenue case of Monopolistic Competition?
(a) Zero
59. Monopoly power refers to the firm’s ability (b) Greater than one
to (c) Less than one
(a) Earn economic profit (d) Infinite
(b) Restrict entry into the industry
(c) Set prices above marginal cost 66. What is the price elasticity of demand in
(d) Posses economies of scale case of perfect competition?
(a) Zero
60. The market of computer is not in (b) Greater than one
equilibrium, then which of the following (c) Less than one
statement is definitely true? (d) Infinite
(a) The prices of the computer will rise
(b) The prices of the computer will fall 67. What is the price elasticity of demand in
(c) The prices of the computer will case of monopoly?
change, but not enough information is (a) Zero
given to determine the direction of the (b) Large
change (c) Small
(d) None of the above (d) Infinite

61. Which of the following is incorrect? 68. What is the MR revenue at the midpoint on
(a) The shape of average cost is U-shaped a straight line demand curve?
(b) MC curve cuts AC curve at the minimum (a) Zero
level of AC (b) Positive
(c) The AR and MR curves of the industry (c) Negative
under perfect competition are parallel (d) Infinite
to X-axis 69. When MR is rising, TR is
(d) MC curve cuts AVC curve at the (a) Rising
minimum level of AVC (b) Falling
(c) Zero
62. Kinked demand curve in oligopoly market (d) None of the above
explains 70. When MR is falling, TR is
(a) Price and output determination (a) Rising
(b) Existence of very few firms in the (b) Falling
market (c) Zero
(c) Price rigidity (d) None of the above
(d) Price leadership 71. When MR is Zero, TR is
 (a) Rising 78. According to Prof. Pigou, the second
(b) Falling degree of price discrimination will take
(c) Zero away
(d) Maximum (a) Entire consumer surplus
72. What is the slope of TR Curve in Case of (b) Part of consumer surplus
Perfect competition Market? (c) Not affect consumer surplus
(a) Upward (d) None of the above
(b) Downward
(c) Horizontal 79. Total output will be divided in two sub-
(d) vertical markets in such a way that
73. State the effect on equilibrium when (a) MR under two sub-market is same
increase in demand is equal to increase in (b) AR under two sub-market is same
supply. (c) MR under inelastic sub-market is
(a) Increase in equilibrium price greater than elastic sub-market
(b) Increase in equilibrium quantity (d) MR under elastic sub-market is greater
(c) Increase in equilibrium price and than inelastic sub-market
quantity
(d) Decrease in equilibrium quantity 80. Prices in elastic sub-market are
comparatively_____ than prices in
74. For price discrimination under monopoly, inelastic sub-market
the seller has to divide the market into (a) Higher
various sub-market on the basis of (b) Lower
(a) Price (c) Equal
(b) Output (d) None of the above
(c) Elasticity
(d) Area 81. The demand in imperfect competition is
(a) Elastic
75. For the price discrimination under (b) Inelastic
monopoly, _____should be same under two (c) Perfectly elastic
sub-markets (d) Perfectly inelastic
(a) Average revenue
(b) Marginal revenue 82. The demand curve facing an oligopolist,
(c) Average cost according to kinked demand curve
(d) Marginal cost hypothesis, has a ‘kink’ at the level of the
(a) Maximum output
76. The seller under monopoly will charge high (b) Maximum price
prices for the same goods in____ sub- (c) Prevailing output
market. (d) Prevailing price
(a) Elastic
(b) Inelastic 83. Which of the following is not the
(c) Both characteristics of oligopoly?
(d) None of the above (a) Interdependence
(b) Importance of advertising and selling
77. Following are the objectives of price costs
discrimination except (c) Single seller of the product
(a) To earn maximum profit (d) Group behavior
(b) To reduce cost 1.
(c) To enjoy economies of scale 84. The market demand curve for a perfectly
(d) To secure equity through pricing competitive industry is QD = 12 - 2P. The
market supply curve is QS = 3 + P. The
market will be in equilibrium if
 (a) P=6 and Q=9 (d) None of these
(b) P=5 and Q=2
(c) P=3 and Q=6 91. When a monopolist charges more than two
(d) P= 4 and Q=4 prices but not so many to take away the
entire consumer surplus, it is called price
85. In the short run, a monopolist will shut discrimination of
down if it is producing a level of output (a) First order
where marginal revenue is equal to short- (b) Second order
run marginal cost and price is (c) Third order
(a) Greater than ATC (d) Highest order
(b) Less than AVC
(c) Greater than AVC 92. Which of the following may not result in
(d) Less than AVC monopoly?
(a) Control over supply of raw material
86. Of the following what is it that a (b) Heavy investment
monopolist cannot do? (c) Legal factor like licence, trade marks,
(a) Increase price etc
(b) Restrict Supply (d) High Demand
(c) Increase sales at high prices
(d) Practice of price discrimination 93. Price under very long period is known as
(a) Long period price
87. A monopolist can determine (b) Free Market Price
(a) Price (c) Normal Price
(b) Output (d) Secular Price
(c) Both
(d) Either price or output
94. Under Monopolistic Competition in Long
88. In which form of market forms, the Output is Produced at
demand curve of the firm is perfectly (a) The level of LAC where the profits are
elastic maximum but LAC is not at its minimum
(a) Perfect Competition possible at that point
(b) Imperfect Competition (b) The minimum possible of LAC
(c) Monopoly (c) The Maximum of LAC
(d) Oligopoly (d) None of These

89. 95. Choose the wrong statement in reference

Price Output to price discrimination of first degree
80 50 (a) The price charged for each unit will be
79 51 different
(b) No consumer surplus is Left
What is the Marginal Revenue at 51st unit? (c) The Profit of the monopolist is highest
(a) 29 (d) It results in maximum satisfaction to
(b) 80 the consumers
(c) 79
(d) 50 96. A firm working under the conditions of
perfect competition has to
90. In which form of market is price paid by (a) Fix the price to be charged
customers minimum in long run i.e price = (b) Decide the quantity to be sold
minimum LAC in long run? (c) Both (a) and (b)
(a) Monopoly (d) None of the Above
(b) Oligopoly
(c) Perfect Competition
97. Which of the following market form of 99. If sandwiches are being sold for Rs. 14
competition has highest price elasticity? each, what is Mohan’s profit maximizing
(a) Perfect Competition level of output
(b) Monopoly
(a) 10 sandwiches
(c) Monopolistic competition
(d) None of these (b) 40 sandwiches
(c) 50 sandwiches
98. Choose the right statement with reference (d) 60 sandwiches
to monopolistic competition
(a) The products are differentiated 100. What is the total variable cost when
(b) The firm is a price maker for its own 60 sandwich are produced?
product
(a) Rs. 690
(c) Each firm exercises control on the price
of its product to some extent. (b) Rs. 960
(d) All of these (c) Rs. 110
Use the table to answer question 24-27 (d) Rs. 440

Mohan sweets is a small restaurant and a 101. What is the average fixed cost when
price taker. The table below provides the 20 sandwiches are produced?
data of Mohan’s sandwich output and costs (a) Rs. 5
in Rupees (b) Rs. 3.33
Q TC TFC TVC AVC AC MC (c) Rs. 10
0 100 (d) Rs. 2.5
10 210
20 300 102. Between 10 and 20 sandwiches,
30 400 what is the marginal cost per sandwich?
40 540 (a) Rs. 11
50 790 (b) Rs. 13
60 1060 (c) Rs. 14
(d) Rs. 9