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Market Structure Quiz | Market Structure Objective Type Questions and Answers

Questions
21 Which of the following is a barrier to entry that typically results in monopoly?
A Production of the industry's product requires a large initial capital investment.
B The firm controls the entire supply of a raw material.
C The firm holds an exclusive government franchise.
D Production of the industry's product is subject to economies of scale over a broad range of output.

Answer: Production of the industry's product requires a large initial capital investment.
22 The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The market supply curve is QS = 3 + P. The market will be in equilibrium if
A P = 4 and Q = 4.
B P = 3 and Q = 6.
C P = 5 and Q = 2.
D P = 6 and Q = 9.

Answer: P = 3 and Q = 6.
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23 A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost and price is
A less than average variable cost.
B greater than average variable cost.
C greater than average total cost.
D less than average total cost.

Answer: less than average variable cost.
24 Which of the following markets comes close to satisfying the assumptions of a perfectly competitive market structure?
A The market for petroleum and natural gas.
B The market for agricultural commodities such as wheat or corn.
C The stock market.
D All of the above come close to satisfying the assumptions of perfect competition.

Answer: All of the above come close to satisfying the assumptions of perfect competition.
25 If one perfectly competitive firm increases its level of output, market supply
A will increase and market price will fall.
B will increase and market price will rise.
C and market price will both remain constant.
D will decrease and market price will rise.

Answer: and market price will both remain constant.
26 If a firm sells its output on a market that is characterized by few sellers and many buyers and limited long-run resource mobility, then the firm is
A a monopolist.
B an oligopolist.
C a perfect competitor.
D a monopolistic competitor.

Answer: an oligopolist.
27 If a firm sells its output on a market that is characterized by many sellers and buyers, a differentiated product, and unlimited long-run resource mobility, then the firm is
A a monopolistic competitor.
B a perfect competitor.
C a monopolist.
D an oligopolist.

Answer: a monopolistic competitor.
28 If a firm sells its output on a market that is characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes and barriers to long-run resource mobility, then the firm is
A a monopolist.
B an oligopolist.
C a perfect competitor.
D a monopolistic competitor.

Answer: a monopolist.
29 Which of the following best describes a successful monopolist?
A The only seller of a difficult-to-substitute product
B The only buyer of a resource or type of labor
C The only buyer of a consumer product
D The only seller of a non-essential product

Answer: The only seller of a difficult-to-substitute product
30 Which of the following is most likely to be observed in a monopolistically competitive market?
A Government antitrust oversight
B Standardized, homogenous products
C Collusion and price-fixing between firms
D Non-price competition, such as advertising

Answer: Non-price competition, such as advertising

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