Forms of Market Perfect Competition, Monopoly, Monopolistic Competition, Oligopoly Quiz - ICSE Class 12 Economics
Free practice quiz: Forms of Market Perfect Competition, Monopoly, Monopolistic Competition, Oligopoly (ICSE Class 12 Economics). 52 multiple-choice questions with answers and explanations. Play online, no sign-up needed.
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Under perfect competition, a firm's demand curve is:
- Downward sloping
- Upward sloping
- Perfectly elastic
- Perfectly inelastic
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Answer: C. Perfectly elastic
In perfect competition, individual firms are price takers. They can sell any quantity at the prevailing market price. This means their demand curve is horizontal, or perfectly elastic, at that price.
In a perfectly competitive market, long-run equilibrium is characterized by:
- Economic profits
- Economic losses
- Zero economic profit (normal profit)
- Price < Marginal Cost
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Answer: C. Zero economic profit (normal profit)
In perfect competition, the free entry and exit of firms ensure that in the long run, firms earn only normal profits. If firms are making supernormal profits, new firms will enter, increasing supply and driving down prices. If firms are making losses, some will exit, decreasing supply and raising prices until normal profits are restored.
A government granting exclusive rights to a company to produce and sell a product is an example of:
- Perfect Competition
- Monopolistic Competition
- Oligopoly
- Legal Monopoly
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Answer: D. Legal Monopoly
A legal monopoly is created by government action, such as granting patents, copyrights, or exclusive franchises, which restrict competition.
A firm in perfect competition finds that its marginal cost is $8 and its marginal revenue is $6. To maximize profits, the firm should:
- Increase output
- Decrease output
- Remain at the current output level
- Raise its price
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Answer: B. Decrease output
For profit maximization, MR must equal MC. Currently, MC ($8) is greater than MR ($6). This means the firm is producing too much. By reducing output, the firm will move up its marginal cost curve, increasing MC until it equals MR ($6).
Which market structure most closely resembles the assumptions of 'buyers' cooperatives' or 'producer cooperatives'?
- Perfect Competition
- Monopoly
- Monopolistic Competition
- Oligopoly
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Answer: A. Perfect Competition
While cooperatives are distinct entities, the theoretical underpinnings of a large number of independent buyers or sellers acting in unison to influence market prices without individual market power are closest to the idealized structure of perfect competition, where individual participants are price takers.