Reason Based Question’s
(Q1) If Coke raises its price, Pepsi must follow. Otherwise it will lose its market share.
(Q2) “A monopolist can charge any price for his product.
(Q3) Price exceeds MC under monopoly, but not under perfect competition.
(Q4) In the long period, level of output under monopoly is always less than under perfect competition, even when a monopolist earns extra normal profits
(Q5) A monopoly firm can make abnormal profits in the long run, but not a firm under monopolistic competition
(Q6) Normal profits is a part of total cost.
(Q7) “ Competition promotes efficiency ”.
(Q8) A monopolist cannot fix both the quantity that he likes to produce and the price at which he would like to sell.
(Q9) Individual firm having a significant share in the total market supply has to accept the price as decided by the industry.
(Q10) Shape of AR is a horizontal line parallel to the X-axis where the firm is a price maker.
(Q11) Demand curve under monopolistic competition is more elastic as compared to demand curve under monopoly.
(Q12) Duopoly is a special case of monopoly.
(Q13) A change in price by one firm leads to reaction from other rival firms in the oligopoly market
(Q14) Car industry is an example of imperfect oligopoly.
(Q15) A competitive firm can sell more by lowering the price
(Q16) MR equals AR under perfect competition.
(Q17) A monopolist is a price maker
(Q18) Difference between firm and industry disappears in case of monopoly
(Q19) Abnormal profits are possible in the long run for a monopoly firm
(Q20) A seller under monopolistically competitive market has full control over price.
(Q21) Under oligopoly, firms focus on price competition
(Q22) Oligopoly firms always remain few in number.
(Q23) Under oligopoly market, there are large number of buyers and sellers of the product.
(Q24) In perfect market firm independently determines price.
(Q25) Under monopoly, a firm can sell all the goods at a single price.
(Q26) There is no selling cost under monopoly due to presence of single seller.
Ans: False. Selling costs are incurred under monopoly only for informative purpose.
(Q27) Monopolistic competitive firm is a price taker
Ans: False. It can influence the price by creating a differentiated image of its product through heavy selling costs.
(Q28) A monopoly firm can make abnormal profits in the long run, but not a firm under monopolistic competition and perfect competition.
Ans: True . A monopoly firm can make abnormal profits in the long run due to restrictions on entry and exit. However, a firm under perfect competition and monopolistic competition cannot make abnormal profits due to freedom of entry and exit.
(Q29) Under perfect competition, market price can be influenced by both buyers and sellers.
Ans: False Neither sellers nor buyers can influence the market price
(Q31) The horizontal straight line demand curve under perfect competition indicates that an individual firm has no control over price of his product.
Ans: True. An individual firm under perfect competition is a price taker and has to accept the price fixed by the market forces of demand and supply.
(Q32) An oligopoly firm faces a downward sloping demand curve
Ans: False . The demand curve under oligopoly is indeterminate as exact behaviour pattern of a firm cannot be determined with certainty.
(Q33) Price of the product never changes under perfect competition.
Ans: False. Under perfect competition, an individual firm cannot change the price. But market price can change owing to change in demand and supply.
(Q34) A monopolist fixes price of his product on the basis of elasticity of demand for his product.
Ans: True . Often, higher price is fixed when elasticity of demand is low. Low price is fixed when elasticity of demand is high.
(Q35) Price exceeds MC under monopoly, but not under perfect competition
Ans: True. Because under perfect competition AR = MR, while under monopoly AR > MR. Even when equilibrium in both cases is struck when MR = MC.
(Q36) Normal profit exists for all firms in long-run under perfect competition.
Ans: True. Due to freedom to entry and exit any supernormal profits in short-run is wiped out , therefore in long-run firms can earn only normal profits.
(Q37) Under oligopoly, firms focus on non-price competition.
Ans: True , As any price way will lead to their own losses.
(Q38) ‘Uniform Price’ under perfect competition refers to a situation of unchanged price forever.
Ans: False , The market price can vary due to change in either demand or supply or both
(Q39) The elasticity of demand curve faced by a firm under perfect competition is infinity
Ans: True , The demand curve of a firm under perfect competition is a horizontal straight line parallel to X-axis, thus the elasticity of demand will be infinity.
(Q40) In perfect competition, price is determined independently by a firm.
Ans: False , price is determined by the industry and a firm is only price-taker.
(Q41) In monopolistic competitive market, price discrimination can easily be made.
Ans: False because here price discrimination cannot be made due to lack of full control over supply of the product.
(Q42) There is no selling cost in perfect competition and monopoly forms of market.
Ans: True because under perfect competition homogeneous products are sold at a uniform price and in monopoly, product has no close substitute in the market.
(Q43) Market refers to a place where goods are bought and sold.
Ans: False. Market refers to a mechanism or an arrangement that facilitates contact between the buyers and sellers for the sale and purchase of goods and services. This contact can be personal or through telephone or e-mail.
(Q44) Perfect competition means best competition in the market.
(Q45) Cartels are formed to control market supply, not price of the product.
Ans: False Cartels are formed to control both supply as well as price of the product. In fact, price is sought to be raised by restricting the supply of the product in the market.