The questions below on market Structure were curated from UNILAG’S Past Exam as it has been observed that questions are frequently asked on this topic almost every academic session. Click on this link to read on more topics in Economics.
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Questions on Market Structure
1. The conditions for profit maximization by a firm is that:
(a) MC = AR and MC cuts MR from below
(b) MC = MR and MC cuts MR from above
(c) MC = MR and MC cuts MR from below
(d) MC = AC and AR cuts MC from below
2. Which of the following is not a characteristic of perfect competition?
(a) A large number of buyers and sellers
(b) The existence of only zero profit in the short run
(c) Uniform price
(d) The absence of transparent cost
(e) Free entry and free exit
3. Who is the originator of the theory of monopolistic competition?
(a) R.A. Musgrave
(b) J.M. Keynes
(c) Joan Robinson
(d) Adam Smith
(e) E.H. Chamberlain
4. Product differentiation is a typical feature of:
(a) Perfect competition
(b) Oligopoly
(c) Monopoly
(d) Pure competition
(e) Monopolistic competition
5. When the monopolist equates MC to MR then, the firm would be:
(a) Maximizing output
(b) Minimizing costs
(c) Maximizing profit
(d) Maximizing sales
(e) Maximizing economies of scale
6. A monopoly is said to misallocate resources
(a) because without competition there is no pressure on the firm to be efficient
(b) because under certain circumstances different consumers are charged different prices for the same product or services
(c) because the market price under monopoly is greater than the marginal cost of additional output
(d) because it faces a downward-sloping demand curve
7. Which of the following is a unique characteristic of oligopoly?
(a) production of a standardized product
(b) the use of advertising and product development
(c) mutual interdependence among firms in the industry
(d) none of the above
(e) the existence of barriers to entry including patents and copyrights
8. In a perfectly competitive market, the firm is in the long-run equilibrium when
(a) There is excess profit
(b) MR = ATC = MC = P
(c) Price is stable
(d) The price is greater than the average cost
(e) None of the above
9. A profit-maximizing monopolist
(a) follows the same rules for profit maximization as the perfectly competitive firm
(b) follows different rules for profit maximization than does the perfectly competitive firm
(c) will set price equal to marginal cost in order to determine the maximizing output
(d) will set marginal cost equal to average revenue in order to determine the maximizing output
10. A profit-maximizing firm will always produce
(a) where marginal cost is less than marginal revenue
(b) where marginal revenue is equal to marginal cost
(c) at a point of minimum average cost
(d) where marginal cost is greater than marginal revenue
(e) None of the above
Market Structure Essay Questions
1. Define Perfect Completion, Monopoly, Monopolistic Completion and Oligopoly.
2. Show with graphs on how firms maximize profit under Perfect Competition and Monopoly.
Answers
1 -C
2 -B
3 -E
4 -E
5 -C
6 -A
7 -C
8 -B
9 -A
10 -B