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# CA Foundation | Price Output Determination under Different Market Forms MCQ Test | Chanakya Commerce Classes

CA Foundation Paper 4 Business Economics Chapter 4 Unit 3 Price Output Determination under Different Market Forms MCQ test page with instant scoring by Chanakya Commerce Classes.

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Business Economics MCQ
Price Output Determination under Different Market Forms MCQ Test
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CA Foundation · Paper 4 · Business Economics
Chapter 4 · Unit 3 ·
Price Output Determination under Different Market Forms
MCQ Test Page · CA Foundation level · ICAI pattern · instant scoring and answer review
30 MCQs
Foundation Level
Past Exam Style
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Question 01
Perfect competition is characterised by:
single seller and no close substitutes
large number of buyers and sellers selling homogeneous product
few sellers selling differentiated products only
many sellers with strong collusion
Perfect competition has many buyers, many sellers, homogeneous product, free entry and exit, and perfect knowledge.
Question 02
A firm under perfect competition is called a price taker because:
it fixes any price it likes
it faces no competition
buyers are compelled to pay higher price
it cannot influence market price individually
An individual firm under perfect competition is too small to influence market price.
Question 03
Under perfect competition, average revenue is equal to:
price
average cost
total cost
marginal cost only in long run
In perfect competition, AR = MR = Price.
Question 04
Under perfect competition, marginal revenue is:
always less than price
always less than average revenue
equal to price
equal to average cost
A competitive firm sells each additional unit at the same market price, so MR = AR = Price.
Question 05
A perfectly competitive firm reaches equilibrium where:
AR = AC
MR = MC and MC cuts MR from below
TR is zero
MC is minimum
The standard equilibrium condition is MR = MC and MC must be rising, cutting MR from below.
Question 06
In the short run, a competitive firm may continue production even when it incurs loss if price covers:
average cost
average fixed cost only
marginal cost only
average variable cost
In the short run, a firm continues if price is at least equal to AVC, because it can cover variable cost and contribute something toward fixed cost.
Question 07
If price falls below average variable cost in the short run, a competitive firm should:
shut down production
expand output
set its own higher price
merge with buyers
Below AVC, the firm cannot cover variable cost and minimises loss by shutting down.
Question 08
In long-run equilibrium under perfect competition, firms earn:
supernormal profit only
losses only
normal profit only
monopoly profit
Free entry and exit eliminate supernormal profit and losses in long-run perfect competition.
Question 09
Under monopoly there is:
one buyer and many sellers
one seller and no close substitute for the product
many sellers and differentiated products
few sellers with interdependence
Monopoly is characterised by a single seller with strong barriers to entry and no close substitute in the standard textbook sense.
Question 10
A monopolist is called a price maker because:
government fixes the price for him
buyers decide the price
there is perfect competition
he has significant control over price through control of output
A monopolist influences market price because he is the only seller.
Question 11
Under monopoly, the demand curve facing the firm is:
the market demand curve
perfectly elastic
vertical in all cases
the supply curve
Since the monopolist is the only seller, the firm demand curve is the market demand curve.
Question 12
Under monopoly, marginal revenue is generally:
equal to average revenue
greater than price
less than average revenue
equal to average cost
To sell more, a monopolist usually lowers price, so MR lies below AR.
Question 13
A monopolist attains equilibrium where:
AR = AC
MR = MC and MC cuts MR from below
price = minimum AVC only
TR = TC always
The equilibrium condition MR = MC applies under monopoly too.
Question 14
The price charged by a monopolist is determined from:
marginal cost curve alone
supply curve only
average cost curve only
demand curve corresponding to the equilibrium output
The monopolist fixes output where MR = MC, then reads price from the demand curve.
Question 15
Monopolistic competition is characterised by:
many firms selling differentiated products
one seller and no substitutes
few firms with mutual dependence only
homogeneous product and no selling cost
Monopolistic competition combines many firms with product differentiation.
Question 16
An important feature of monopolistic competition is:
absence of product differentiation
single seller
selling costs like advertisement may exist
firms are price takers like perfect competition
Selling costs are common because firms try to distinguish their products.
Question 17
In monopolistic competition, the firm’s demand curve is generally:
perfectly elastic
downward sloping
vertical
horizontal and identical to MR
Because of product differentiation, each firm has some control over price, so its demand curve slopes downward.
Question 18
Oligopoly is a market where the number of sellers is:
one
very large
none
few
Oligopoly means a few firms dominate the market.
Question 19
A major feature of oligopoly is:
interdependence of firms
absence of competition
single buyer
perfectly elastic demand for each firm
Each firm in oligopoly considers rivals’ reactions while making decisions.
Question 20
Which market form is most closely associated with kinked demand curve discussions?
perfect competition
monopoly
oligopoly
monopsony
The kinked demand curve is a standard oligopoly explanation of price rigidity.
Question 21
Under perfect competition, a firm earns supernormal profit in the short run when:
price is less than average cost
price is greater than average cost at equilibrium output
price is less than AVC
MR is zero
If AR (price) exceeds AC at equilibrium output, the firm earns supernormal profit.
Question 22
Under perfect competition, a firm earns normal profit when:
price is below AVC
MR is below MC
AR is above AC
AR is equal to AC at equilibrium output
Normal profit means total revenue covers total cost including normal return to entrepreneur.
Question 23
Under perfect competition, a firm incurs loss in the short run when:
price is less than average cost but not less than average variable cost
price is above average cost
MR is above MC
price equals AC
In that case the firm covers variable cost but not total cost, so it incurs loss and still may continue in short run.
Question 24
Which one of the following is true for monopoly?
AR and MR are equal
firm demand curve is horizontal
AR slopes downward and MR lies below it
price is always equal to marginal cost
That is the standard relationship between AR and MR under monopoly.
Question 25
Free entry and free exit of firms is a feature of:
monopoly only
perfect competition and monopolistic competition
oligopoly only
monopsony only
Free entry and exit are standard features of perfect competition and monopolistic competition.
Question 26
Which market form best fits the example of many toothpaste brands competing through advertising?
perfect competition
monopoly
pure oligopoly only
monopolistic competition
Many brands, product differentiation, and advertising are classic monopolistic competition features.
Question 27
Which market form best fits public utility services in standard textbook examples?
monopoly
perfect competition
monopolistic competition
perfect oligopoly
Traditional textbook examples often treat some public utilities as monopoly or near-monopoly situations.
Question 28
In perfect competition, industry price is determined by:
an individual firm alone
government alone
industry demand and industry supply
average cost of a single seller
Market or industry demand and supply determine price; individual firms only accept it.
Question 29
Under perfect competition, the supply curve of a firm in the short run is the portion of:
average fixed cost curve
marginal cost curve above average variable cost
average revenue curve above average cost
demand curve above total cost
A competitive firm supplies where price equals MC, provided price covers AVC.
Question 30
Which statement is correct?
all firms in all markets are price takers
monopoly and perfect competition are identical
oligopoly has no interdependence among firms
price-output determination differs according to market form
This is the core idea of the unit: equilibrium and pricing behaviour vary across different market forms.
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MCQ Test · Chapter 4 · Unit 3 · Price Output Determination under Different Market Forms