Topic Questions (MCQ – HARD): Market Structure – 3auk

In an industry where a large number of firms produce an identical product, what could be a possible reason for the downward-sloping demand curve facing each individual firm?

Decreasing marginal utility

Ease of entering and exiting the market

Imperfect consumer knowledge

Limited consumer purchasing power

In a market with contestable characteristics, how would a firm typically determine its pricing strategy?

Set a price to optimize short-term profits.

Set a price to maximize total revenue.

Set a price to discourage the entry of new firms.

Set a price based on achieving minimum average cost.

The diagram illustrates the cost and revenue curves of a monopolist firm.

The monopolist is currently operating at output level OQ0 and setting the price at OP0.
How can the monopolist generate profits?

A monopolist determines that at their present production level, the marginal revenue amounts to $3.00 while the marginal cost equals $3.60.

What approach should the monopolist undertake to enhance their current profit level?

decrease price and keep outputs the same

decrease price and increase outputs

increase price and decrease outputs

increase price and keep outputs the same

The diagram represents an industry operating with constant average costs.

In a perfectly competitive market, the industry produces output level OD.
Which region quantifies the reduction in consumer surplus if the industry were to transition into a monopoly?

CFG

EFCA

EFGA

BFGD

Which market structure is characterized by a limited number of firms competing against potential new entrants?

contestable market

a monopoly

a oligopolistic market

monopolistic competition