Market Structures MCQs 2026

Barriers to entry under monopoly may include

1. Afree entry of identical firms✓
2. Bpatents, control of key resources and legal franchises✓
3. Czero fixed costs always✓
4. Dperfect information only✓

Non-price competition is common in

1. Aperfect competition only✓
2. Bpure monopoly with no rivals only✓
3. Coligopoly and monopolistic competition✓
4. Dbarter economies only✓

Collusive oligopoly aims to behave like

1. Aa joint monopolist maximizing industry profit✓
2. Bperfectly competitive firms✓
3. Cprice takers only✓
4. Dnon-profit cooperatives only✓

Cartels tend to be unstable because

1. Amembers have incentive to cheat by secretly expanding sales✓
2. Bprofits are always zero✓
3. Centry is impossible✓
4. DMR always equals AR✓

A cartel is an agreement among firms to

1. Acoordinate output/prices to raise joint profits✓
2. Bincrease competition always✓
3. Celiminate all barriers✓
4. Dforce perfect competition✓

In the kinked demand model, MR is discontinuous at the kink, so

1. Aprice must change with every MC shift✓
2. BMR equals AR always✓
3. Coutput is always zero✓
4. DMC can shift within a range without changing price✓

The kinked demand curve model of oligopoly explains

1. Aperfect competition pricing✓
2. Bprice rigidity when rivals match price cuts but not increases✓
3. Cmonopoly MR=AR✓
4. Dalways rising prices✓

Oligopoly is a market structure with

1. Amany price-taking firms✓
2. Bone seller only✓
3. Cinfinite free entry always✓
4. Dfew interdependent sellers✓

Product differentiation in monopolistic competition makes the firm's demand

1. Aperfectly elastic✓
2. Bperfectly inelastic✓
3. Cvertical at MR✓
4. Ddownward sloping but relatively elastic✓

In long-run monopolistic competition equilibrium, firms typically

1. Aearn permanent supernormal profit✓
2. Bproduce at minimum ATC always✓
3. Cface perfectly elastic demand✓
4. Dearn normal profit with excess capacity✓

Monopolistic competition features

1. Aone firm only✓
2. Bhomogeneous product and price taking✓
3. Cmany firms selling differentiated products with free entry✓
4. Dblocked entry forever✓

A necessary condition for price discrimination is

1. Aperfect competition✓
2. Bidentical demand elasticities✓
3. Czero market power✓
4. Dability to prevent resale (arbitrage) between markets✓

Third-degree price discrimination charges different prices based on

1. Aidentical elasticities in all markets✓
2. BMC only without demand✓
3. Crandom lottery only✓
4. Didentifiable market segments with different elasticities✓

First-degree (perfect) price discrimination charges

1. Atwo-part tariffs only✓
2. Beach unit at the buyer's maximum willingness to pay✓
3. Csame price to all✓
4. Donly quantity discounts✓

Price discrimination means charging

1. Aone price to all buyers always✓
2. Bdifferent prices for the same product to different buyers✓
3. Conly cost-plus pricing✓
4. Donly peak-load pricing by law✓

Natural monopoly typically occurs when

1. Amany small firms have rising AC✓
2. BMC always exceeds AC✓
3. Cdemand is perfectly elastic✓
4. Dlong-run average cost falls continuously over relevant demand✓

Deadweight loss under monopoly arises because

1. Aprice equals MC✓
2. Bentry is free✓
3. CMR equals AR✓
4. Doutput is restricted below the competitive level✓

For a monopolist, marginal revenue is

1. Aless than price (AR)✓
2. Bequal to price always✓
3. Cgreater than price always✓
4. Dequal to ATC always✓

Under monopoly, the demand curve facing the firm is

1. Aperfectly elastic✓
2. Bhorizontal at MC✓
3. Cthe market demand curve (downward sloping)✓
4. Didentical to MR✓

A monopolist maximizes profit where

1. AAR = AC always✓
2. Bprice equals MC always✓
3. CMR = MC✓
4. DMR equals AR always✓

A monopoly exists when there is

1. Amany sellers of identical goods✓
2. Btwo firms only always✓
3. Ca single seller of a product with no close substitutes✓
4. Dperfect free entry✓

Homogeneous product is a feature of

1. Amonopolistic competition only✓
2. Boligopoly with branding only✓
3. Cmonopoly with unique good only✓
4. Dperfect competition✓

The short-run supply curve of a competitive firm is

1. Athe entire ATC curve✓
2. Bthe MC curve above minimum AVC✓
3. Cthe AFC curve only✓
4. Dthe AR curve below AVC✓

Shut-down point for a competitive firm in the short run is where

1. Aprice equals AFC✓
2. Bprice equals minimum AVC✓
3. Cprice equals ATC always✓
4. DMR equals AFC✓

In long-run equilibrium under perfect competition, firms earn

1. Anormal profit only✓
2. Bsupernormal profit forever✓
3. Cpersistent losses always✓
4. Dmonopoly rent always✓

For a perfectly competitive firm, the demand curve is

1. Aperfectly elastic at the market price✓
2. Bperfectly inelastic✓
3. Cdownward sloping like monopoly✓
4. Dupward sloping always✓

In the short run, a perfectly competitive firm maximizes profit where

1. AAR = AC only always✓
2. BTR is minimum✓
3. Cprice equals AFC only✓
4. DMR = MC and MC is rising✓

Under perfect competition, a firm is a

1. Aprice maker✓
2. Bcartel leader✓
3. Cprice taker✓
4. Dmonopsonist always✓

Perfect competition is characterized by

1. Alarge number of buyers and sellers with free entry and exit✓
2. Ba single seller with blocked entry✓
3. Cfew interdependent firms only✓
4. Dgovernment-fixed prices only✓

Allocative efficiency requires

1. Aprice equal to AFC✓
2. BMR equal to AR always✓
3. CATC maximized✓
4. Dprice equal to marginal cost✓

A competitive industry's long-run supply may be upward sloping if

1. Aall inputs are free✓
2. Btechnology never changes✓
3. Cinput prices rise as industry expands (increasing-cost industry)✓
4. Ddemand is zero✓

Monopoly power is often measured by the Lerner index

1. AP/MC only without gap✓
2. B(P − MC)/P✓
3. CMC − P✓
4. DATC/AFC✓

In perfect competition, long-run industry equilibrium implies

1. AP > MC always✓
2. BP = MC = minimum ATC✓
3. CMR < MC always✓
4. DP = AFC only✓

Bilateral monopoly refers to

1. Amany sellers and many buyers✓
2. Bperfect competition✓
3. Ca single seller facing a single buyer✓
4. Dpure monopsony without a seller✓

Monopsony is a market with

1. Aa single buyer of a factor or product✓
2. Ba single seller only✓
3. Cmany buyers✓
4. Dfree entry of buyers✓

Under perfect competition, economic profit in the short run

1. Amust always be zero✓
2. Bmust always be positive✓
3. Ccannot be negative✓
4. Dcan be positive, zero or negative✓

Limit pricing by an incumbent aims to

1. Amaximize short-run monopoly profit always✓
2. Binvite free entry✓
3. Celiminate MC✓
4. Dset price low enough to deter entry✓

Predatory pricing refers to

1. Aalways pricing at MC✓
2. Btemporarily pricing below cost to drive rivals out✓
3. Ccharging different elasticities fairly✓
4. Dcost-plus only✓

Cournot oligopoly assumes firms choose

1. Aprices only in Stackelberg fashion✓
2. Bquantities simultaneously taking rivals' output as given✓
3. Cadvertising only✓
4. Dzero output always✓

Bertrand competition with identical products and constant MC tends to

1. Adrive price down to marginal cost✓
2. Byield monopoly price always✓
3. Celiminate all sales✓
4. Draise price above monopoly✓

Excess capacity theorem is associated with

1. Amonopolistic competition in the long run✓
2. Bperfect competition long run✓
3. Cpure monopoly min ATC always✓
4. Dcartel min AVC✓

A patent creates temporary monopoly mainly to

1. Aensure perfect competition✓
2. Bencourage innovation by granting exclusive rights✓
3. Celiminate all R&D✓
4. Dfix prices forever✓

In monopoly, the relationship between AR and MR (linear demand) is

1. AMR lies above AR✓
2. BMR bisects the horizontal intercept of AR (MR falls twice as steep)✓
3. CMR equals AR✓
4. DMR is horizontal✓

Selling costs (advertising) are especially important in

1. Aperfect competition with homogeneous goods✓
2. Bpure barter only✓
3. Ccommand economies only✓
4. Dmonopolistic competition and oligopoly✓

Price leadership in oligopoly means

1. Aall firms independently ignore rivals✓
2. Bgovernment sets all prices✓
3. Cone firm sets price and others follow✓
4. DMC is ignored✓

Contestable market theory stresses that

1. Aonly actual many firms matter✓
2. Bentry costs are always infinite✓
3. Cpotential entry can discipline incumbents even with few firms✓
4. Dcollusion is costless✓

Under perfect competition, consumer surplus is generally

1. Alarger than under monopoly for the same cost conditions✓
2. Balways zero✓
3. Csmaller than under monopoly always✓
4. Dequal to producer surplus always✓

A discriminating monopolist can increase profit if

1. Aelasticities are identical and resale is free✓
2. Bmarkets have different price elasticities of demand✓
3. CMC is infinite✓
4. Ddemand is zero✓

Two-part tariff is a form of pricing that combines

1. Aa fixed fee plus a per-unit charge✓
2. Bonly peak prices✓
3. Conly auctions✓
4. Donly cost-plus without fee✓

In the short run, a monopolist may continue production with losses if

1. Aprice is below AVC✓
2. Bprice covers AVC (and contributes to fixed costs)✓
3. CAR is zero✓
4. DMC exceeds ATC always without covering AVC✓

Homogeneous oligopoly sells

1. Ahighly differentiated brands only✓
2. Bunique patented goods only✓
3. Cstandardized products (e.g., steel, cement)✓
4. Dpublic goods only✓

Differentiated oligopoly is typical of

1. Awheat farming under perfect competition✓
2. Bpure monopoly utilities only✓
3. Cautomobiles and soft drinks✓
4. Dlabour markets only✓

The Herfindahl-Hirschman Index (HHI) measures

1. Aonly the number of workers✓
2. Bonly price elasticity✓
3. Cmarket concentration using squared market shares✓
4. Donly GDP growth✓

X-inefficiency under monopoly refers to

1. Aproducing where P = MC✓
2. Bzero economic profit✓
3. Cperfect cost control✓
4. Dfailure to minimize costs due to lack of competitive pressure✓

In perfect competition, the industry demand curve is

1. Adownward sloping while firm demand is horizontal✓
2. Bhorizontal for the industry✓
3. Cupward for every firm✓
4. Didentical to MR for industry✓

A profit-maximizing monopolist never produces on the inelastic portion of demand because

1. AMC is always zero✓
2. BMR would be negative there✓
3. CAR equals MR✓
4. DATC is minimized there✓

Dumping in international trade is related to

1. Aidentical prices worldwide always✓
2. Bperfect competition only✓
3. Cprice discrimination between domestic and foreign markets✓
4. Dzero tariffs only✓

Game theory is especially useful for analyzing

1. Aperfectly competitive price taking✓
2. Bpure monopoly without rivals✓
3. Coligopolistic strategic behaviour✓
4. Dnational income identities only✓

Nash equilibrium in oligopoly means

1. Aall firms earn zero profit✓
2. Bno firm can improve payoff by unilaterally changing strategy✓
3. Ccollusion is automatic✓
4. Dprice equals ATC always✓

Public regulation of natural monopoly often aims to

1. Amaximize monopoly deadweight loss✓
2. Bban all production✓
3. Callow P closer to AC or MC while ensuring viability✓
4. Dforce P far above AC✓

In monopolistic competition, advertising can

1. Anever affect demand✓
2. Bonly raise MC without demand effects✓
3. Celiminate differentiation✓
4. Dshift and/or change the elasticity of the firm's demand✓

The supply curve concept is not well-defined for

1. Aperfect competition✓
2. Bcompetitive industry long run✓
3. Cconstant-cost competitive industry✓
4. Dmonopoly (no unique P–Q supply relation independent of demand)✓

Peak-load pricing charges higher prices when

1. Ademand is high relative to capacity✓
2. Bdemand is always zero✓
3. CMC is negative✓
4. Dmarkets are perfectly competitive only✓

A dominant firm with a competitive fringe faces

1. Aperfectly elastic demand only✓
2. Bresidual demand after fringe supply✓
3. Cno demand curve✓
4. Donly government demand✓

Cross-subsidization by a multi-product firm means

1. Ausing profits from one market to support another✓
2. Bpricing every product at MC only✓
3. Cnever using joint costs✓
4. Dperfect competition in all lines✓

In the long run under free entry monopolistic competition

1. Aprofit remains supernormal forever✓
2. Bthe number of firms adjusts until economic profit is zero✓
3. Closses persist forever✓
4. Dentry is blocked by definition✓

Perfect competition assumes perfect knowledge so that

1. Ano firm can charge more than the market price✓
2. Bfirms can hide quality forever✓
3. Cbuyers never learn prices✓
4. Darbitrage is impossible✓

A multiplant monopolist allocates output so that

1. Aonly one plant produces✓
2. BMC differs arbitrarily✓
3. CMC is equalized across plants (and equals MR)✓
4. DAR equals AFC in each plant✓

Tacit collusion differs from a formal cartel because

1. Acoordination occurs without an explicit agreement✓
2. Bit is always legal and efficient✓
3. CMR equals AR✓
4. Dentry is free✓

Compared with perfect competition, monopoly typically results in

1. Ahigher price and lower output✓
2. Blower price and higher output✓
3. Cidentical P and Q✓
4. Dzero consumer surplus always✓