Tutorial Questions on Market Structure

BD103 Microeconomics
TUTORIAL Questions on Market Structure
Section A – Multiple Choice
Q1 Which market model has the least number of firms?
(a) Monopolistic competition
(b) Perfect competition
(c) Monopoly
(d) Oligopoly

Q2 Perfect competitive firms maximize:
(a) Total profits by producing where price exceeds average total cost by the greatest amount
(b) Per unit profits by producing where marginal revenue equals marginal cost
(c) Total profits by producing where price equals marginal cost (why not MC=MR?)
d) Market share by producing where price equals average total cost

Q3 Which idea is inconsistent with perfect competition?
(a) Short-run losses
(b) Product differentiation (product standardisation)
(c) Freedom of entry and exit for firms
(d) A large number of buyers and sellers

Q4 Price of good X
MC

ATC
D

AVC

0

A B C

K

Quantity

Refer to the above graph. The level of output (MR=MC) at which this firm will produce is:
(a) 0C.
(b) 0B.
(c) 0A.
(d) 0K.

Q5 One feature of pure monopoly is that the monopolist is:
(a) a producer of products with close substitutes.
(b) one of several producers of a product.

(c) a price taker.
(d) a price maker.

Q6 Which is a characteristic of a monopolistic competition?
(a) Standardized product.
(b) A relatively small number of firms.
(c) Absence of non-price competition.
(d) Relatively easy entry.

Q7 The demand curve for a monopolistically competitive firm has a:
(a) positive slope and the marginal revenue curve has a negative slope.
(b) positive slope and the marginal revenue curve has a positive slope.
(c) negative slope and the marginal revenue curve has a negative slope.
(d) negative slope and the marginal revenue curve has a positive slope.

Q8 Price
(1)
(2)

(3)
(4)
0

Output

Refer to the above graph of a representative firm in monopolistic competition.
What does line (1) represent?
(a) Demand
(b) Marginal cost
(c) Marginal revenue
(d) Average total cost

Q9

(a) zero
(b) area AFHC
(c) area AFGB
(d) area BGHC

Q10