Question 1.1. The main difference between perfect competition and monopolistic c

Question

Question 1.1. The main difference between perfect competition and monopolistic competition is: (Points : 2)

      a) the number of sellers in the market.

      b) the ease of exit from the market.

    c)   the difference in the firm's profits in the long run.

     d) the degree of product differentiation.

Question 2.2. Which of the following industries is most likely to represent the Monopolistic competition market structure? (Points : 2)

     a) The Agriculture industry

      b) Utility Companies

     c) Restaurants services

     d) Tobacco products

Question 3.3. If firms are earning economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run? (Points : 2)

     a) Some firms will leave the market.

      b) Firms will join together to keep others from entering.

      c) New firms will enter the market, thereby eliminating the economic profit.

      d) Firms will continue to earn economic profit.

Question 4.4. In the Kinked Demand curve model, price tends to settle at the kink because (Points : 2)

      a) MR=MC rule does not apply

     b) there is no unique MR curve

     c) the demand curve is inelastic throughout the range

      d) none of the above

Question 5.5. A Cartel is defined to be: (Points : 2)

     a) Any oligopolistic industry with fewer than 4 firms.

      b) A form of oligopoly in which firms agree to sell at different prices like in monopolistic competition.

      c) A form of oligopoly in which firms formally agree to establish a common price, in effect acting like a monopoly.

       d)A form of oligopoly in which firms agree to compete with each other on an equal basis.

Question 6.6. Which of the following is the best example of a product or service that provides a benefit externality? (Points : 2)

     a) the construction of a private road that allows vehicles if a toll is paid

      b) a public library

       c)a bookstore that is open 24 hours

      d) the construction of a golf course in a private hotel

Question 7.7. An example of a cost externality occurs when a mining company: (Points : 2)

      a) dumps waste in river upstream from a popular fishing spot

       b)produces coal that is not in demanded in a recession

     c) underpays its employees

      d) overwork its employees

Question 8.8. Which of the following may change the supply curve? (Points : 2)

       a)Taste of consumers

       b)Income of consumers

      c) Technology

      d) Price of related goods

Question 9.9. X and Y are substitute goods. X is put on sale "buy one get one free". This will lead to

       a)an increase in demand for Y

      b) a decrease in demand for Y

       c)an increase in demand for X and Y

      d) a decrease in demand for X and Y

Explanation / Answer

1.1 d

2.2 c

3.3 c

4.4 b

5.5 c

6.6 b

7.7 a

8.8 d

9.9 b

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