Chapter MCQ Test 2 — Forms of Market
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A monopolist faces a downward-sloping demand curve, unlike a competitive firm, because the monopolist:
Is the whole market, so to sell more it must lower the price
Is a price taker
Has many rivals
Sells an identical product
Explanation: Being the entire industry, a monopolist's sales follow the market demand curve, which slopes down.
Question 2 of 10
Two toothpaste brands compete largely through advertising and packaging rather than big price cuts. This reflects:
Non-price competition under monopolistic competition
Perfect competition
A pure monopoly
A price taker market
Explanation: Differentiated-product firms rely on branding and advertising — non-price competition.
Question 3 of 10
When one airline in a four-firm market cuts fares, the others quickly match it. This behaviour shows the oligopoly feature of:
Interdependence
Free entry
Identical products
Price taking
Explanation: Few firms watch and react to each other's moves — the essence of interdependence.
Question 4 of 10
A patent that prevents any other firm from making a drug for years helps create a:
Monopoly
Perfect competition
Monopolistic competition
Oligopoly of many
Explanation: A patent is a legal barrier to entry, leaving a single seller — a monopoly.
Question 5 of 10
Compared with perfect competition, prices under monopolistic competition tend to be slightly higher mainly because of:
Product differentiation and advertising costs
Identical products
Government price floors
Free goods
Explanation: Branding gives each firm some price power and adds selling costs, nudging prices above the competitive level.
Question 6 of 10
Which market form gives consumers the greatest variety of choice?
Monopolistic competition
Monopoly
Perfect competition
Pure monopoly
Explanation: Many differentiated brands offer the widest variety to consumers.
Question 7 of 10
Steel produced by a few large firms selling a near-identical product is an example of:
Oligopoly
Monopolistic competition
Perfect competition
Monopoly
Explanation: Few firms selling a homogeneous product is an oligopoly (homogeneous oligopoly).
Question 8 of 10
Why are monopolies often regulated by the government?
To stop them charging excessive prices and protect consumers
To remove all firms
To ban advertising
To create more monopolies
Explanation: Without competition a monopolist can overcharge, so regulation protects consumers.
Question 9 of 10
Oligopoly firms often avoid aggressive price wars because a price cut by one is likely to:
Be matched by rivals, hurting everyone's profits
Be ignored
Raise everyone's price
Have no effect
Explanation: Mutual matching of price cuts can leave all firms worse off, so they avoid price wars.
Question 10 of 10
Reading the comparison table, the form with 'one seller, unique product, blocked entry, full price control' is:
Monopoly
Perfect competition
Monopolistic competition
Oligopoly
Explanation: Those four characteristics together describe a monopoly.