Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many firms selling identical products and no barriers to entry.

Question 2

In a monopoly, the profit-maximizing output is determined by which condition?

Accepted Answer

Where marginal revenue equals marginal cost: $$MR = MC$$

Question 3

Which of the following is NOT typically considered a barrier to entry in a market?

Accepted Answer

Product differentiation

Question 4

A deadweight loss in a monopoly occurs because:

Accepted Answer

The monopolist produces less than the socially optimal quantity, causing some mutually beneficial trades not to occur.

Question 5

Which of the following is an example of an oligopoly in the real world?

Accepted Answer

Coles & Woolworths in the Australian supermarket industry

Question 6

In monopolistic competition, what happens to economic profit in the long run?

Accepted Answer

Firms earn zero economic profit due to entry of new firms.

Question 7

Suppose a monopolist faces the following demand curve: $$P = 100 - 2Q$$ and has constant marginal cost $$MC = 20. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 8

Which of the following best explains why oligopolistic firms are interdependent in their decision-making?

Accepted Answer

Each firm's pricing and output decisions affect and are affected by the decisions of rival firms.

Question 9

If a monopolistically competitive firm is earning positive economic profit in the short run, what is likely to happen in the long run?

Accepted Answer

New firms will enter, driving economic profit to zero.

Question 10

Which of the following is a key characteristic of monopolistic competition?

Accepted Answer

Product differentiation

Question 11

A firm in perfect competition will shut down in the short run if:

Accepted Answer

Price is less than average variable cost: $$P \u003c AVC$$

Question 12

Which of the following is most likely to result from high barriers to entry in a market?

Accepted Answer

Firms can sustain economic profits in the long run.

Question 13

Suppose the government grants a patent to a pharmaceutical company. This is an example of which type of barrier to entry?

Accepted Answer

Legal barrier

Question 14

If a monopolist sets a price above marginal cost, what is the likely effect on consumer and producer surplus?

Accepted Answer

Consumer surplus decreases, producer surplus increases, and deadweight loss is created.

Question 15

Which of the following best describes the long-run equilibrium in monopolistic competition?

Accepted Answer

Firms produce where $$P = ATC$$ and earn zero economic profit.

Question 16

Which of the following is NOT a feature of an oligopoly?

Accepted Answer

A large number of small firms

Question 17

Suppose two airlines, Qantas and Virgin, dominate the Australian domestic market. If Qantas lowers its prices, what is the most likely response from Virgin in an oligopolistic market?

Accepted Answer

Virgin will likely lower its prices as well to remain competitive.

Question 18

Which of the following equations represents the profit-maximizing rule for any firm, regardless of market structure?

Accepted Answer

$$MR = MC$$

Question 19

If a market is characterized by network effects, what does this imply?

Accepted Answer

The value of the product increases as more people use it.

Question 20

Which of the following is most likely to occur in a market with significant product differentiation?

Accepted Answer

Firms have some control over price and compete on non-price factors.

Market Structures: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly

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