CBSE Class 12 Economics The Theory of Firm Under Perfect Competition MCQs Set B

Question. Under perfect competition the number of firms
(a) Is about 10
(b) Are many but limited
(c) Is large
(d) Is limited

Answer : C

Question. Which of the following is the condition for equilibrium of a firm?
(a) MC curve must cut MR curve from above
(b) MR = MC
(c) None of the options
(d) Both of these

Answer : B

Question. Other name by which average revenue curve known:
(a) Indifference curve
(b) Profit curve
(c) Average cost curve
(d) Demand curve

Answer : D

Question. Recently in a small city, building contractors lobbied the city council to pass a law requiring all people working on residential dwellings be licensed by the city. Why would the contractors lobby for this requirement?
(a) to reduce the cost of building dwellings
(b) There is no good explanation for this type of lobbying.
(c) to guarantee that work on dwellings is of high quality
(d) to create a legal barrier to entry

Answer : D

Question. Which of the following type of competition is just a theoretical economic concept, not a realistic case where actual competition and trade take place?
(a) Monopolistic competition
(b) Monopoly
(c) Oligopoly
(d) Perfect competition

Answer : D

Question. Which of the following is an example of perfect competition?
(a) Agriculture
(b) Banking sector
(c) Car manufacturing
(d) Railways

Answer : A

Question. Given the market price, the output level of a profit maximising firm will depend on
(a) Quality
(b) Place
(c) Period
(d) Raw material

Answer : C

Question. Which of the following refers to a vertical straight line supply curve?
(a) Infinite elasticity of supply
(b) Unitary elasticity of supply
(c) Zero elasticity of supply
(d) Perfectly elasticity of supply

Answer : C

Question. In perfect competition, since the firm is a price taker, the ________ curve is straight line
(a) Total cost
(b) Marginal cost
(c) Total revenue
(d) Marginal revenue

Answer : D

Question. What is price line
(a) The demand curve
(b) The AR curve
(c) The MR curve
(d) The TR curve

Answer : C

Question. The product of AR and price at every unit sold is the firm’s
(a) TR
(b) TVC
(c) MR
(d) AR

Answer : A

Question. Given the market price, the output level of a profit maximising firm will depend on
(a) Quality
(b) Place
(c) Period
(d) Raw material

Answer : C

Question. The concept of supply curve is relevant only for?
(a) Monopoly
(b) Monopolistic competition
(c) Perfect competition
(d) Oligopoly

Answer : C

Question. Which of the following market types has a large number of firms that sell similar but slightly different products?
(a) perfect competition
(b) oligopoly
(c) monopolistic competition
(d) monopoly

Answer : C

Question. In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm’s long-run decision?
(a) what price to charge buyers for the product
(b) how much to spend on advertising and sales promotion
(c) the profit-maximizing level of output
(d) whether or not to enter or exit an industry

Answer : D

Question. If demand for a seller’s product is perfectly elastic, which of the following is correct?
(a) There is no incentive to sell at a price below the market price.
(b) It will not sell any output at all if it tries to price its product above the market price.
(c) There are a very large number of perfect substitutes for the seller’s product.
(d) All of the options answers are correct.

Answer : D

Question. All of the following are examples of product differentiation in monopolistic competition EXCEPT
(a) new and improved packaging.
(b) lower price.
(c) acceptance of more credit cards than the competition.
(d) location of the retail store.

Answer : B

Question. Marketing consists of what?
(a) selling at a lower price than rivals sell for
(b) producing more output to lower average costs
(c) advertising and packaging
(d) None of the above answers are correct.

Answer : C

Question. If you have found the percentage of the value of sales accounted for by the four largest firms in an industry, you have found the
(a) elasticity of supply value.
(b) Herfindahl-Hirschman Index.
(c) elasticity of demand value.
(d) four-firm concentration ratio.

Answer : D

Question. The revenue of a firm per unit sold is its
(a) MR
(b) AR
(c) TR
(d) TC

Answer : B

Question. Which of the following is not the determinant of supply curve?
(a) Technological progress
(b) Input prices
(c) Unit tax
(d) All of the options

Answer : D

Question. Which of the following refers to the percentage change in quantity supplied of a good to a percentage change in its price?
(a) Time elasticity of supply
(b) Cross elasticity of supply
(c) Price elasticity of Supply
(d) Income elasticity of supply

Answer : C

Question. A firm can sell as much as it wants at the market price. The situation is related to?
(a) Monopoly
(b) Monopolistic competition
(c) Perfect competition
(d) Oligopoly

Answer : C

Question. In which of the following types of market structures, are resources, assumed to be mobile?
(a) Oligopoly
(b) Perfect competition
(c) Monopolistic competition
(d) Monopoly

Answer : B

Question. In monopolistic competition, the products of different sellers are assumed to be
(a) similar but slightly different.
(b) identical perfect substitutes.
(c) either identical or differentiate(d)
(d) unique without any close or perfect substitutes.

Answer : A

Question. Beyond producer’s equilibrium when MR<MC, the firm earns only
(a) Abnormal profit
(b) Normal loss
(c) Abnormal loss
(d) Normal Profit

Answer : C

Question. The elasticity at a point on a straight line supply curve passing through the origin will be
(a) 3.0
(b) 1.0
(c) 4.0
(d) 2.0

Answer : B

Question. A rational consumer is a person who?
(a) Has perfect knowledge of the market
(b) Is not influenced by persuasive advertising
(c) Behaves at all times, other things being equal, in a judicious manner
(d) Knows the prices of goods in different market and buys the cheapest

Answer : A

Question. How market supply responds to improvement in technology?
(a) Higher costs per unit of output
(b) Extra costs per unit of output
(c) Lower costs per unit of output
(d) Zero costs per unit of output

Answer : C

Question. Under perfect competition, which of the following condition does not hold for a firm to maximise profit?
(a) P = MC
(b) MC slope downwards
(c) P ≥ AC (Long run)
(d) P ≥ AVC (Short run)

Answer : B

Question. Which kind of product is produced in a firm having perfect competition?
(a) Homogeneous products
(b) Heterogeneous products
(c) Homogeneous and heterogeneous products
(d) Non-identical products

Answer : A

Question. Which of the following cannot determine the firm’s profit maximising output level in the short run?
(a) Market price is greater than the minimum average variable cost
(b) Market price is less than the minimum average variable cost
(c) Average variable cost at the given output exceeds the market price
(d) Market price is equal to the minimum average variable cost

Answer : C

Question. The market type known as perfect competition is
(a) almost free from competition and firms earn large profits.
(b) highly competitive and firms find it impossible to earn an economic profit in the long run.
(c) dominated by fierce advertising campaigns.
(d) marked by firms continuously trying to change their products so that consumers prefer their product to their competitors’ products.

Answer : B

Question. Which of the following is the condition for equilibrium of a firm?
(a) MC curve must cut MR curve from above
(b) MR = MC
(c) None of the options
(d) Both of these

Answer : B

Question. Which of the following is the best example of a natural monopoly?
(a) owning the only licensed taxicab in town
(b) the United States Postal Service
(c) ownership of the only ferry across Puget Sound for twenty miles
(d) the cable television company in your hometown

Answer : D

Question. Profits of the firm will be more at:
(a) MR = MC
(b) Additional revenue from extra unit equalits additional cost
(c) Both of above
(d) None of the options

Answer : C

Question. Under perfect competition the number of firms
(a) Is about 10
(b) Are many but limited
(c) Is large
(d) Is limited

Answer : C

Question. In perfect competition, a firm earns profit when __________ exceeds the _____________?
(a) Total revenue, total fixed cost
(b) Marginal cost, marginal revenue
(c) Average revenue, average cost
(d) Total cost, total revenue

Answer : C

Question. When AR = Rs. 10 and AC = Rs. 8, the firm makes?
(a) Gross profit
(b) Supernormal profit
(c) Normal profit
(d) Net profit

Answer : B

Question. When _____, the firms are earning just normal profit:
(a) AC = AR
(b) MC = AC
(c) AR = MR
(d) MC = MR

Answer : A

Question. Firms face competition when the good they produce
(a) is in a market with natural barriers to entry.
(b) is unique.
(c) is in a market with legal barriers to entry.
(d) has a close substitute

Answer : D

Question. Which of the following would create a natural monopoly?
(a) requirement of a government license before the firm can sell the good or service
(b) technology enabling a single firm to produce at a lower average cost than two or more firms
(c) an exclusive right granted to supply a good or service
(d) ownership of all the available units of a necessary input

Answer : B

Question. How does a fall in input price affect the supply curve?
(a) Decrease in marginal cost
(b) Increase in average cost
(c) Decrease in supply
(d) Increase in marginal cost

Answer : A

Question. Which of the following refers to super-normal losses situation under perfect competition, during the short run?
(a) P > AC
(b) P < AC
(c) P = AC
(d) P ≠ AC

Answer : B

Question. Which of the following point refers to the breakeven point?
(a) AR = AVC
(b) AR ≠ AC
(c) AR = AC
(d) AR ≥ AC

Answer : C

Question. In perfect competition, in the long run, ______________?
(a) There are large profits for the firm
(b) There is no profit and no loss for the firm
(c) There are negligible profits for the firm
(d) There are large losses for the firm

Answer : B

Question. Firms in a monopolistic market are price _:
(a) Takers
(b) Givers
(c) Makers
(d) Acceptors

Answer : C

Question. Before producer’s equilibrium when MR > MC, the firm earns only
(a) Normal Profit
(b) Normal loss
(c) Abnormal loss
(d) Abnormal profit

Answer : D