120+ Micro Economics analysis Solved MCQs

1.

Which of the following industry is most closely approximates the perfectly competitive model.

A. automobiles
B. cigarette
C. newspaper
D. wheat farming
Answer» D. wheat farming
2.

Under perfectly competitive market an individual seller is a

A. price taker
B. price maker
C. individual seller can influence the price
D. none of the above
Answer» A. price taker
3.

Uniform price is a feature of

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» A. perfect competition
4.

Which of the following is not a feature of a perfectly competitive market

A. large number of buyers and sellers
B. homogeneous product
C. group behaviour
D. perfect competition
Answer» C. group behaviour
5.

A perfectly competitive firm gets only normal profit when

A. mc = mr
B. ac = ar
C. ac < ar
D. mc = ar
Answer» B. ac = ar
6.

Which one of the following is a feature of a perfect competition

A. group behavior
B. selling cost
C. homogeneous product
D. differentiated product
Answer» C. homogeneous product
7.

Average revenue curve under perfect competition is

A. upward sloping
B. downward sloping
C. horizontal straight line
D. vertical straight line
Answer» C. horizontal straight line
8.

Marginal revenue curve under perfect competition is

A. upward sloping
B. downward sloping
C. horizontal straight line
D. vertical straight line
Answer» C. horizontal straight line
9.

Average revenue curve under imperfect competition is

A. upward sloping
B. downward sloping
C. horizontal straight line
D. vertical straight line
Answer» B. downward sloping
10.

Marginal revenue curve under imperfect competition is

A. upward sloping
B. downward sloping
C. horizontal straight line
D. vertical straight line
Answer» B. downward sloping
11.

Perfect competition prevails when the demand for the output of each producer is

A. elastic
B. perfectly elastic
C. inelastic
D. perfectly inelastic
Answer» D. perfectly inelastic
12.

Equilibrium price is determined under perfect competition by

A. the market demand
B. the market supply
C. the interaction between market demand and market supply
D. none of the above
Answer» C. the interaction between market demand and market supply
13.

In the market period, market supply curve is

A. perfectly elastic
B. perfectly inelastic
C. elastic
D. inelastic
Answer» B. perfectly inelastic
14.

Given the supply of a commodity, in the market period, the price of a commodity is determined by

A. the market demand curve alone
B. the market supply curve alone
C. the market demand curve and the market supply curve
D. none of the above
Answer» A. the market demand curve alone
15.

Total profit is maximum when

A. total revenue is equal to total cost
B. total revenue is greater than total cost
C. the positive difference between total revenue and total costs is largest.
D. all of the above
Answer» C. the positive difference between total revenue and total costs is largest.
16.

Total profits are maximized where

A. tr equals tc
B. tr curve and tc curve are parallel
C. tr curve and tc curves are parallel and tc exceeds tr
D. tr curve and tc curves are parallel and tr exceeds tc
Answer» D. tr curve and tc curves are parallel and tr exceeds tc
17.

The equality between MC and MR is

A. a necessary condition for equilibrium of the firm under perfect condition
B. a sufficient condition for equilibrium of the firm under perfect competition
C. a necessary but not sufficient condition for equilibrium of the firm under perfect condition
D. a necessary and sufficient condition for equilibrium of the firm under perfect condition
Answer» C. a necessary but not sufficient condition for equilibrium of the firm under perfect condition
18.

The condition of equilibrium of the industry under perfect competition is

A. mc = mr
B. mc = ac
C. mc = mr = ar
D. mc = ac = ar
Answer» D. mc = ac = ar
19.

In the short-run, a competitive firm can earn

A. normal profit
B. super normal profit
C. loss
D. either a or b or c depending upon the level of average cost.
Answer» D. either a or b or c depending upon the level of average cost.
20.

If price is equal to average cost, in the short-run, the competitive firm can earn

A. only normal profit
B. super normal profit
C. loss
D. all of the above
Answer» A. only normal profit
21.

If price is greater than average cost, in the short-run, the competitive firm can earn

A. normal profit
B. super normal profit
C. loss
D. all of the above
Answer» B. super normal profit
22.

If price is less than average cost, in the short-run, the competitive firm can earn

A. normal profit
B. super normal profit
C. loss
D. all of the above
Answer» C. loss
23.

Break-even point is a point where price is equal to

A. ac
B. avc
C. afc
D. mc
Answer» A. ac
24.

Shut-down point is a point where price is equal to

A. ac
B. avc
C. afc
D. mc
Answer» B. avc
25.

In the long run, a competitive firm can earn

A. normal profit
B. super normal profit
C. loss
D. any of the above
Answer» A. normal profit
26.

The importance of time element in price determination was firstly analyzed by

A. adam smith
B. alfred marshall
C. david ricardo
D. j m keynes
Answer» B. alfred marshall
27.

In the market period, price determination in the case of a perishable commodity is influenced by its

A. demand
B. supply
C. demand as well as the supply
D. none of the above
Answer» A. demand
28.

In the short-period,

A. all factors are fixed
B. some factors are fixed and others are variable
C. all factors are variable
D. none of the above
Answer» B. some factors are fixed and others are variable
29.

In the long-period,

A. all factors are fixed
B. some factors are fixed and others are variable
C. all factors are variable
D. none of the above
Answer» C. all factors are variable
30.

Zero economic profit arises in the long run in the case of

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» A. perfect competition
31.

Zero economic profit includes

A. zero normal profit
B. normal profit
C. super normal profit
D. average profit
Answer» B. normal profit
32.

Economic efficiency is achieved in the long run in the case of

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» A. perfect competition
33.

Consumer surplus will be maximum in the case of

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» A. perfect competition
34.

At the optimum short-run level of output, the firm will be

A. maximizing total profit
B. minimizing total losses
C. either maximizing total profit or minimizing total losses
D. maximizing profit per unit
Answer» C. either maximizing total profit or minimizing total losses
35.

The short-run supply curve of a perfectly competitive firm is given by

A. rising portion of the mc curve over and above the shut-down point
B. rising portion of the mc curve over and above the break-even point
C. rising portion of the mc curve over and above the ac curve
D. rising portion of the mc curve
Answer» A. rising portion of the mc curve over and above the shut-down point
36.

When the perfectly competitive firm and industry are both in long run equilibrium

A. p = mr = smc = lmc
B. p = mr = sac = lac
C. p = mr =lowest point on the lac curve
D. all of the above
Answer» D. all of the above
37.

Monopolistic competition is characterized by

A. few firms’ selling differentiated products
B. many firms selling homogeneous product
C. few firms selling homogeneous product
D. many firms selling differentiated products
Answer» D. many firms selling differentiated products
38.

The theory of monopolistic competition was popularized by

A. marshall
B. keynes
C. chamberlin
D. pigou
Answer» C. chamberlin
39.

A monopolistically competitive market is distinguished from perfect competition by the fact that

A. few sellers
B. it has few buyers
C. it deals with differentiated products
D. none of the above
Answer» C. it deals with differentiated products
40.

Excess capacity is a hallmark of

A. perfect competition
B. monopoly
C. oligopoly
D. monopolistic competition
Answer» D. monopolistic competition
41.

Monopolistically competitive firms

A. are small in size
B. have small share in the market
C. are large in the size
D. both a and b
Answer» D. both a and b
42.

Selling cost assumes paramount importance in

A. perfect competition
B. monopoly
C. monopolistic competition
D. none of the above
Answer» C. monopolistic competition
43.

Under monopolistic competition, there can be freedom of entry in the sense that there is freedom to produce

A. close substitutes
B. perfect substitutes
C. complements
D. none of the above
Answer» A. close substitutes
44.

A firm under monopolistic competition advertise because

A. to compete successfully with rival
B. to lower cost of production
C. to increase revenue and sales
D. since it cannot raise price
Answer» C. to increase revenue and sales
45.

In the case of monopolistic competition,

A. short run supply curve cannot be defined
B. mr curve cannot be defined
C. ar curve cannot be defined
D. none of the above
Answer» A. short run supply curve cannot be defined
46.

Under monopolistic competition, super normal profit arise when

A. ar=ac
B. mr=mc
C. ar>ac
D. ar<ac
Answer» C. ar>ac
47.

Which of the following condition are met in the long run equilibrium of the monopolistic competitor earning only normal profit

A. mc=ac
B. p=ac
C. p=mr
D. p=mc
Answer» B. p=ac
48.

The term group equilibrium is referred to

A. duopoly
B. monopolistic competition
C. perfect competition
D. oligopoly
Answer» B. monopolistic competition
49.

Increase or decrease in the level of production by a monopolistically competitive firm have ------- impact on price and output decisions of other firms

A. very significant
B. significant
C. small
D. negligible
Answer» D. negligible
50.

Monopolistic competitive firm fixes the price of its product

A. independent of the price of close substitutes
B. close to the prices of close substitutes
C. at a very high level
D. none of the above
Answer» B. close to the prices of close substitutes
51.

Under monopolistic competition, an increase in the number of firms producing close substitutes will make the demand curve of each firm

A. inelastic
B. elastic
C. downward sloping
D. perfectly inelastic
Answer» B. elastic
52.

The demand curve faced by the a monopolistically competitive firm is very elastic if the degree of product differentiation is

A. very low
B. very high
C. zero
D. moderate
Answer» B. very high
53.

Which one of the following is not a feature of monopolistic competition

A. homogeneous products
B. differentiated products
C. selling cost
D. no uniform prices
Answer» A. homogeneous products
54.

The book “The theory of Monopolistic Competition” is written by

A. alfred marshal
B. e h chamberlin
C. joan robinson
D. j m keynes
Answer» B. e h chamberlin
55.

The book “The Economics of Imperfect Competition” is written by

A. alfred marshal
B. e h chamberlin
C. joan robinson
D. j m keynes
Answer» C. joan robinson
56.

It is assumed that the cost curves of all the firms in the monopolistic competition are

A. different due to product differentiation
B. never considered in equilibrium
C. never formulated
D. same in spite of product differentiation
Answer» D. same in spite of product differentiation
57.

Free entry into monopolistically competitive market ensures that all firms will produce at the lowest point of LAC

A. always
B. sometimes
C. never
D. cannot say
Answer» C. never
58.

Under monopolistic competition, the long run equilibrium of the firm is established at the

A. minimum point of lac
B. point where lac is still falling
C. point where lac is rising
D. minimum point of lmc
Answer» B. point where lac is still falling
59.

In short run a firms in monopolistic competition

A. always earns profit
B. incurs loss
C. earns normal profit only
D. may earn normal profit, abnormal profit or incur losses
Answer» D. may earn normal profit, abnormal profit or incur losses
60.

In long run all the firms in the monopolistic competition

A. always earns profit
B. incurs loss
C. earns normal profit only
D. may earn normal profit, abnormal profit or incur losses
Answer» C. earns normal profit only
61.

The short run equilibrium level of output of the monopolistic competitor is given by

A. price = mc
B. price= ac
C. mc=mr
D. p=mr
Answer» C. mc=mr
62.

When a group of monopolistic competition attains the equilibrium, the firms in the group

A. charge different prices, but produce identical outputs
B. produce different output, but charge the same price
C. charge different price and produce different output
D. none of the above
Answer» B. produce different output, but charge the same price
63.

The elasticity of average revenue curve of the monopolistic competitor, depends on

A. the extent of product differentiation
B. the number of firms
C. number of buyers
D. both a & b
Answer» D. both a & b
64.

Under monopolistic competition, the demand curve of the product of an individual firm depends on the nature and prices of close substitutes

A. true
B. false
C. not always
D. depends on the nature of the product
Answer» A. true
65.

When demand curve is elastic, MR is

A. 1
B. 0
C. positive
D. negative
Answer» C. positive
66.

The best or optimum level of output for the pure monopolist

A. mr=mc
B. p=mc
C. p=ac
D. highest p
Answer» A. mr=mc
67.

Which type of competition leads to maximum exploitation of consumer

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» B. monopoly
68.

In the short run, the monopolist

A. breaks even
B. incurs loss
C. makes profit
D. any of the above
Answer» D. any of the above
69.

The demand for the product of a monopoly firm is

A. inelastic
B. elastic
C. unitary elastic
D. perfectly inelastic
Answer» B. elastic
70.

If the monopolist incurs loss in the short run, then in the long run

A. the monopolist go out of business
B. the monopolist will stay in the business
C. the monopolist break even
D. any of the above
Answer» D. any of the above
71.

Which of the form of monopoly regulation is the most advantages to the consumer

A. price control
B. lump sum tax
C. per unit tax
D. all of the above
Answer» A. price control
72.

The monopolist who is in

A. short run equilibrium will also be in long run equilibrium
B. long run equilibrium will also be in short run equilibrium
C. long run equilibrium may or may not be in short run equilibrium
D. none of the above
Answer» B. long run equilibrium will also be in short run equilibrium
73.

In long run the monopolist can earn abnormal profit because of

A. blocked entry
B. high selling price
C. low cost
D. economies of scale
Answer» A. blocked entry
74.

Price discrimination under monopoly is of

A. one
B. two
C. three
D. four
Answer» C. three
75.

The market in which there is a single seller is called

A. oligopoly
B. monopsony
C. monopoly
D. nine of the above
Answer» C. monopoly
76.

Monopsony refers to

A. single seller
B. a few sellers
C. single buyer
D. a few buyers
Answer» C. single buyer
77.

Discriminating monopoly is possible if two markets have

A. differing elasticity of demand
B. differing average cost
C. same elasticity
D. different average cost
Answer» A. differing elasticity of demand
78.

Monopolist can fix

A. both price and output
B. neither price and output
C. either price and output
D. none of the above
Answer» C. either price and output
79.

A discrimination monopolist charges in a market

A. lower prices if it has lower elasticity
B. higher prices if it has lower elasticity
C. lower prices if it has higher elasticity
D. cannot say
Answer» A. lower prices if it has lower elasticity
80.

A firm practicing price discrimination will be

A. changing qualities of the product
B. buying from the cheapest market
C. buying from firms
D. charging different prices in different markets
Answer» D. charging different prices in different markets
81.

The best level of output for the monopolist is

A. ac is minimum
B. tc=tr
C. tr and tc are parallel
D. tr is maximum
Answer» C. tr and tc are parallel
82.

If the monopolist faces identical demand for his commodity in the two separate markets, by practicing third degree price discrimination

A. will increase his tr and total profit
B. can increase his tr and profit
C. cannot increase his tr and profit
D. will charge different prices in different market
Answer» C. cannot increase his tr and profit
83.

Under pure monopoly, there will be

A. no distinction between firm and industry
B. one firm no industry
C. no firm one industry
D. very few firms
Answer» A. no distinction between firm and industry
84.

Monopolist will not produce that portion of demand curve where the elasticity of demand

A. equal to unity
B. less than unity
C. greater than zero
D. none of the above
Answer» B. less than unity
85.

Under monopoly, the equilibrium price is

A. equal to mc
B. less than mc
C. more than mc
D. equal to ac
Answer» C. more than mc
86.

The cross elasticity of demand for the monopolist product is

A. very low
B. moderate
C. high
D. very high
Answer» A. very low
87.

Which of the following is known as the perfect price discrimination

A. first degree price discrimination
B. second degree price discrimination
C. third degree price discrimination
D. nine of the above
Answer» A. first degree price discrimination
88.

A monopolist usually earns

A. economic profit
B. only normal profit
C. losses
D. profit and losses, which are uncertain
Answer» A. economic profit
89.

Price discrimination is possible

A. under any market form
B. only under monopoly
C. only under monopolistic competition
D. only in perfect competition
Answer» B. only under monopoly
90.

Who introduced various types of price discrimination

A. alfred marshall
B. adam smith
C. a c pigou
D. j b say
Answer» C. a c pigou
91.

Oligopoly is a market situation characterized by

A. large number of buyers and sellers
B. a single seller
C. fairly large number of buyers and sellers
D. a few sellers
Answer» D. a few sellers
92.

‘Indeterminateness of demand curve’ is a feature of

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» D. oligopoly
93.

Selling cost is maximum in the case of

A. monopoly
B. oligopoly
C. perfect competition
D. monopolistic competition
Answer» B. oligopoly
94.

The concept of ‘Kinked demand curve’ is related to

A. monopoly
B. monopolistic competition
C. perfect competition
D. oligopoly
Answer» D. oligopoly
95.

The concept of ‘Kinked demand curve’ was developed by

A. alfred marshal
B. j r hicks
C. p m sweezy
D. a.k sen
Answer» C. p m sweezy
96.

‘Group behavior’ is a feature of

A. monopoly
B. oligopoly
C. perfect competition
D. monopolistic competition
Answer» B. oligopoly
97.

Advertising can become ‘a life and death matter’ in

A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
Answer» D. oligopoly
98.

Classical oligopoly models are related to

A. collusive oligopoly
B. non-collusive oligopoly
C. price leadership model
D. none of the above
Answer» B. non-collusive oligopoly
99.

Price leadership can be in the form of

A. price leadership by a low cost firm
B. price leadership by a dominant firm
C. a barometric price leadership
D. all of the above
Answer» D. all of the above
100.

‘Cartels’ are example for

A. collusive oligopoly
B. non-collusive oligopoly
C. monopsony
D. none of the above
Answer» A. collusive oligopoly
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