Non-competitive Markets (Class 12 Economics)

Practise chapter-wise MCQs for Class 12 Economics — Non-competitive Markets. Every question comes with the correct answer and an explanation.

Non-competitive Markets (Class 12 Economics)

Practise chapter-wise MCQs for Class 12 Economics — Non-competitive Markets. Every question comes with the correct answer and an explanation.

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TL;DR: Practise chapter-wise MCQs for Class 12 Economics — Non-competitive Markets. Every question comes with the correct answer and an explanation.

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Practise chapter-wise MCQs for Class 12 Economics — Non-competitive Markets. Every question comes with the correct answer and an explanation.

Non-competitive Markets MCQs with Answers & Explanations

Q1. In an oligopoly, the firms are typically:

  1. Engaged in a price war indefinitely
  2. Price takers
  3. Interdependent in their decisions ✓ (correct)
  4. Price setters

Explanation: In an oligopoly, the actions of one firm significantly affect the other firms, leading to interdependence in their pricing, output, and advertising strategies.

Q2. When a monopolist faces a downward-sloping demand curve, its marginal revenue (MR) is:

  1. Greater than the price
  2. Equal to the price
  3. Zero at all output levels
  4. Less than the price ✓ (correct)

Explanation: To sell an additional unit, a monopolist must lower the price not only for that unit but also for all previous units sold. Thus, the marginal revenue is less than the price.

Q3. Price discrimination is most likely to occur in which type of market?

  1. Monopoly ✓ (correct)
  2. Perfect Competition
  3. Oligopoly
  4. Monopolistic Competition

Explanation: A monopolist, having sole control over supply, can charge different prices to different consumers for the same good or service, a practice known as price discrimination.

Q4. What is a common outcome of 'excess capacity' in monopolistic competition?

  1. Market efficiency is maximized.
  2. Firms produce less than the output that minimizes average total cost. ✓ (correct)
  3. Firms experience significant economies of scale.
  4. Firms produce at the minimum point of their average total cost curve.

Explanation: In monopolistic competition, firms typically operate with excess capacity, meaning they produce at an output level below that which minimizes average total cost, due to product differentiation and downward-sloping demand.

Q5. A characteristic feature of monopolistic competition is:

  1. Homogeneous products
  2. Significant economies of scale
  3. Product differentiation ✓ (correct)
  4. Collusion among firms

Explanation: Monopolistic competition involves many firms selling differentiated products, which allows them to have some degree of control over their prices.

Q6. Which condition indicates that a monopolist is maximizing its profits?

  1. Total Revenue = Total Cost (TR=TC)
  2. Price = Marginal Cost (P=MC)
  3. Marginal Revenue = Price (MR=P)
  4. Marginal Revenue = Marginal Cost (MR=MC) ✓ (correct)

Explanation: Profit maximization for any firm, including a monopolist, occurs at the output level where marginal revenue equals marginal cost (MR=MC).

Q7. Which of the following is a barrier to entry in a monopoly market?

  1. Government patents and licenses ✓ (correct)
  2. Easy access to raw materials
  3. Low production costs
  4. High consumer demand

Explanation: Government-granted patents, licenses, or exclusive rights create significant barriers to entry, preventing other firms from entering the market and thus maintaining a monopoly.

Q8. Which of the following best describes a monopoly market structure?

  1. Many sellers offering differentiated products.
  2. A single seller selling a unique product with no close substitutes. ✓ (correct)
  3. A few dominant sellers who are interdependent in their pricing and output decisions.
  4. A large number of buyers and sellers, with identical products.

Explanation: A monopoly is characterized by a single seller in the market offering a product with no close substitutes, giving the seller significant market power.

Q9. The Kinked Demand Curve model is often associated with:

  1. Monopoly
  2. Monopolistic Competition
  3. Oligopoly ✓ (correct)
  4. Perfect Competition

Explanation: The Kinked Demand Curve model attempts to explain price rigidity in oligopolistic markets, where firms are hesitant to change prices due to the fear of reactions from competitors.

Q10. In an oligopoly, a cartel is a group of firms that:

  1. Are price takers in the market
  2. Independently decide their production levels
  3. Compete vigorously on price
  4. Collude to set prices and output ✓ (correct)

Explanation: A cartel is an agreement among firms in an oligopoly to act like a single monopolist by coordinating their pricing and output decisions to maximize joint profits.

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