UGC NET Economics UNIT 1-MARKET STRUCTURES AND EFFICIENCY-MCQs

1.

In perfect competition, each firm is a:
A) Price maker
B) Price taker
C) Quantity setter
D) Collusive participant
Answer: B

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2.

Under perfect competition, a firm attains equilibrium where:
A) $AR=AC$
B) $MC=MR$
C) $MC>MR$
D) $TR=TC$

Answer: B

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3.

In long-run equilibrium under perfect competition, which holds true?
A) $P=MC=AC=MR$
B) $P>MC$
C) $P<AC$
D) $P>MR$
Answer: A

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4.

Allocative efficiency is achieved when:
A) $P>MC$
B) $P<MC$
C) $P=MC$
D) $MR=MC$
Answer: C

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5.

Which of the following ensures productive efficiency?
A) Output is maximized.
B) Production occurs at minimum AC.
C) Firms make zero profit.
D) $MC=MR$
Answer: B

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6.

A monopolist faces a downward-sloping demand curve because:
A) Entry barriers are low.
B) It produces homogeneous products.
C) It is the sole producer with no substitutes.
D) It acts as a price taker.
Answer: C

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7.

In monopoly equilibrium:
A) $P=MC$
B) $P=MR$
C) $P>MR=MC$
D) $P=AC=MC$
Answer: C

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8.

Which one is true for perfect competition but not for monopoly?
A) $P=MC$
B) Downward-sloping demand curve
C) Entry barriers exist
D) Firm determines price
Answer: A

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9.

The condition $P>MC$ under monopoly implies:
A) Allocative efficiency
B) Productive efficiency
C) Welfare loss
D) Increasing returns to scale
Answer: C

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10.

The deadweight loss in monopoly arises due to:
A) Perfect knowledge
B) Overproduction
C) Restriction of output
D) Constant returns to scale
Answer: C

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11.

The Lerner Index measures:
A) Profit rate
B) Monopoly power
C) Efficiency loss
D) Output elasticity
Answer: B

$$L=\frac{P-MC}{P}$$

12.

Which of the following market structures shows zero long-run economic profit?
A) Monopoly
B) Oligopoly
C) Monopolistic Competition
D) Duopoly
Answer: C

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13.

In monopolistic competition, each firm faces:
A) Perfectly elastic demand curve
B) Downward-sloping demand curve
C) Perfectly inelastic demand curve
D) Horizontal marginal revenue curve
Answer: B

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14.

The key feature distinguishing monopolistic competition from perfect competition is:
A) Entry restrictions
B) Product differentiation
C) Price control
D) Number of firms
Answer: B

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15.

Under monopolistic competition, the firm achieves equilibrium when:
A) $MC=MR$ and $P=MC$
B) $MC=MR$ and $P>MC$
C) $MC=MR=AC$
D) $MR=AR$
Answer: B

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16.

Which of the following statements is true for long-run equilibrium in monopolistic competition?
A) Firms earn supernormal profits.
B) Firms produce at minimum AC.
C) Firms earn normal profits but not at minimum AC.
D) Price equals MC.
Answer: C

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17.

Excess capacity in monopolistic competition arises because:
A) Firms overproduce
B) Entry is restricted
C) Firms produce less than optimal scale of output
D) Price equals MC
Answer: C

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18.

In oligopoly, firms are:
A) Independent in pricing
B) Interdependent in pricing
C) Non-profit-maximizing
D) Price takers
Answer: B

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19.

Which of the following is a model of oligopoly?
A) Cournot Model
B) Walrasian Model
C) Arrow-Debreu Model
D) Ricardian Model
Answer: A

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20.

In Cournot Duopoly, each firm assumes that the rival’s output:
A) Will remain constant
B) Will increase proportionally
C) Will decrease as own output increases
D) Is unknown
Answer: A

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21.

In Bertrand Competition, firms compete by choosing:
A) Output levels
B) Prices
C) Market shares
D) Advertising levels
Answer: B

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22.

The Kinked Demand Curve model of oligopoly explains:
A) Price discrimination
B) Sticky prices
C) Collusion
D) Entry barriers
Answer: B

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23.

Price rigidity in the kinked demand model arises because:
A) Marginal cost fluctuates
B) Firms fear rival reactions to price changes
C) Demand is perfectly elastic
D) Firms have identical costs
Answer: B

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24.

A collusive oligopoly tends to behave like:
A) Perfect competition
B) Monopoly
C) Duopoly
D) Monopolistic competition
Answer: B

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25.

Allocative inefficiency is present when:
A) $P=MC$
B) $P>MC$
C) $MC>MR$
D) $AR=MR$
Answer: B

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26.

In long-run equilibrium under perfect competition, welfare is:
A) Maximized
B) Reduced
C) Constant
D) Uncertain
Answer: A

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27.

Dynamic efficiency is most likely to occur in:
A) Perfect competition
B) Monopoly and oligopoly
C) Monopolistic competition
D) Duopoly only
Answer: B

🟩 Because large profits can fund R&D and innovation.

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28.

The deadweight loss triangle in monopoly represents:
A) Excess profit
B) Lost consumer and producer surplus
C) Minimum efficiency output
D) Social gain
Answer: B

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29.

Which market structure shows both competition and differentiation?
A) Monopoly
B) Oligopoly
C) Monopolistic Competition
D) Perfect Competition
Answer: C

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30.

When the government regulates a natural monopoly, its aim is usually to:
A) Maximize monopolist’s profit
B) Reduce consumer surplus
C) Bring $P$ closer to $MC$
D) Restrict entry further
Answer: C