86- 120 challenging multiple-choice questions on Oligopoly, Imperfect Market, Duopoly, and Monopolistic Competition, along with their answers
86. **Oligopoly and Game Theory**:
Question: In an oligopoly market, what term describes a situation where firms mutually agree to set high prices and limit output to maximize their joint profits?
a) Collusion
b) Price competition
c) Perfect competition
d) Price leadership
Answer: a) Collusion
87. **Imperfect Market and Market Power**:
Question: In an imperfect market, what concept refers to a firm's ability to influence market prices by changing its output?
a) Perfect competition
b) Market power
c) Elastic demand
d) Price collusion
Answer: b) Market power
88. **Duopoly and Cournot Model**:
Question: In the Cournot duopoly model, what happens to a firm's output if it believes the other firm will increase its production?
a) It increases its output.
b) It decreases its output.
c) It maintains its output.
d) It exits the market.
Answer: a) It increases its output.
89. **Monopolistic Competition and Short-Run Profit Maximization**:
Question: In the short run, what condition must be met for a firm in monopolistic competition to maximize its economic profit?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: b) Price exceeds average variable cost
90. **Oligopoly and Cartels**:
Question: What is the primary challenge for maintaining a successful cartel in an oligopoly market?
a) Effective price leadership
b) Preventing price wars
c) Ensuring perfect competition
d) Enforcing cooperation among member firms
Answer: d) Enforcing cooperation among member firms
91. **Imperfect Market and Product Differentiation**:
Question: What is the main goal of product differentiation in an imperfect market?
a) To reduce market power
b) To create homogeneous products
c) To achieve perfect competition
d) To make products less attractive
Answer: a) To reduce market power
92. **Duopoly and Price Competition**:
Question: In a duopoly using the Bertrand model, what strategy do firms follow when deciding their prices?
a) Quantity collusion
b) Price collusion
c) Price leadership
d) Price competition
Answer: d) Price competition
93. **Monopolistic Competition and Long-Run Equilibrium**:
Question: In the long run, what happens to economic profit for a firm in monopolistic competition?
a) Economic profit always increases.
b) Economic profit always decreases.
c) Economic profit is zero.
d) Economic profit fluctuates randomly.
Answer: c) Economic profit is zero.
94. **Oligopoly and Price Wars**:
Question: What is a potential consequence when firms in an oligopoly engage in aggressive price competition?
a) Collusion
b) Increased consumer surplus
c) A price war leading to lower profits
d) Perfect competition
Answer: c) A price war leading to lower profits
95. **Imperfect Market and Barriers to Entry**:
Question: What are examples of natural barriers to entry in an imperfect market?
a) Patents and government regulations
b) Economies of scale and brand loyalty
c) Collusion and cartel formation
d) Perfect competition and price discrimination
Answer: b) Economies of scale and brand loyalty
96. **Duopoly and Stackelberg Model**:
Question: In the Stackelberg duopoly model, what distinguishes the two firms' decision-making?
a) Both firms make simultaneous quantity decisions.
b) The leader firm sets its output first, and the follower firm observes and reacts.
c) Both firms set their prices simultaneously.
d) The follower firm sets its price first, and the leader firm observes and reacts.
Answer: b) The leader firm sets its output first, and the follower firm observes and reacts.
97. **Monopolistic Competition and Product Differentiation**:
Question: What is a key strategy used by firms in monopolistic competition to achieve product differentiation?
a) Offering identical products
b) Focusing on low prices
c) Making products more homogeneous
d) Creating unique features or branding
Answer: d) Creating unique features or branding
98. **Oligopoly and Price Leadership**:
Question: What is tacit collusion, and why is it challenging to detect and regulate?
a) It involves explicit agreements among firms to set prices.
b) It is an open form of collusion that is easy to detect.
c) It is an informal coordination of prices without explicit agreements.
d) It results in perfect competition.
Answer: c) It is an informal coordination of prices without explicit agreements.
99. **Imperfect Market and Natural Monopoly**:
Question: What type of market structure is characterized by a single firm being the most efficient producer, resulting in no room for competition?
a) Oligopoly
b) Monopoly
c) Natural monopoly
d) Perfect
competition
Answer: c) Natural monopoly
100. **Duopoly and Price Rigidity**:
Question: Why might firms in a duopoly exhibit price rigidity, where they are reluctant to change prices frequently?
a) To maximize profits through price leadership
b) To minimize competition
c) To avoid triggering price wars
d) To achieve perfect competition
Answer: c) To avoid triggering price wars
101. **Monopolistic Competition and Short-Run Equilibrium**:
Question: In the short run, when a firm in monopolistic competition earns economic profit, what is the relationship between price and average total cost?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: d) Price exceeds average total cost
102. **Oligopoly and Game Theory**:
Question: In the repeated prisoner's dilemma game played by oligopolistic firms, what strategy can encourage cooperation and discourage cheating?
a) Tit-for-tat
b) Perfect competition
c) Monopoly pricing
d) Price discrimination
Answer: a) Tit-for-tat
103. **Imperfect Market and Monopsony**:
Question: In an imperfect market, what is the term for a situation where there is a single buyer with significant market power?
a) Oligopsony
b) Monopoly
c) Monopsony
d) Perfect competition
Answer: c) Monopsony
Certainly! Here are fifteen more challenging multiple-choice questions on Oligopoly, Imperfect Market, Duopoly, and Monopolistic Competition, along with their answers:
104. **Oligopoly and Game Theory**:
Question: In an oligopoly market, what term describes a situation where firms mutually agree to set high prices and limit output to maximize their joint profits?
a) Collusion
b) Price competition
c) Perfect competition
d) Price leadership
Answer: a) Collusion
105. **Imperfect Market and Market Power**:
Question: In an imperfect market, what concept refers to a firm's ability to influence market prices by changing its output?
a) Perfect competition
b) Market power
c) Elastic demand
d) Price collusion
Answer: b) Market power
106. **Duopoly and Cournot Model**:
Question: In the Cournot duopoly model, what happens to a firm's output if it believes the other firm will decrease its production?
a) It increases its output.
b) It decreases its output.
c) It maintains its output.
d) It exits the market.
Answer: a) It increases its output.
107. **Monopolistic Competition and Short-Run Profit Maximization**:
Question: In the short run, what condition must be met for a firm in monopolistic competition to maximize its economic profit?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: b) Price exceeds average variable cost
108. **Oligopoly and Cartels**:
Question: What is the primary challenge for maintaining a successful cartel in an oligopoly market?
a) Effective price leadership
b) Preventing price wars
c) Ensuring perfect competition
d) Enforcing cooperation among member firms
Answer: d) Enforcing cooperation among member firms
109. **Imperfect Market and Product Differentiation**:
Question: What is the main goal of product differentiation in an imperfect market?
a) To reduce market power
b) To create homogeneous products
c) To achieve perfect competition
d) To make products less attractive
Answer: a) To reduce market power
110. **Duopoly and Price Competition**:
Question: In a duopoly using the Bertrand model, what strategy do firms follow when deciding their prices?
a) Quantity collusion
b) Price collusion
c) Price leadership
d) Price competition
Answer: d) Price competition
111. **Monopolistic Competition and Long-Run Equilibrium**:
Question: In the long run, what happens to economic profit for a firm in monopolistic competition?
a) Economic profit always increases.
b) Economic profit always decreases.
c) Economic profit is zero.
d) Economic profit fluctuates randomly.
Answer: c) Economic profit is zero.
112. **Oligopoly and Price Wars**:
Question: What is a potential consequence when firms in an oligopoly engage in aggressive price competition?
a) Collusion
b) Increased consumer surplus
c) A price war leading to lower profits
d) Perfect competition
Answer: c) A price war leading to lower profits
113. **Imperfect Market and Barriers to Entry**:
Question: What are examples of natural barriers to entry in an imperfect market?
a) Patents and government regulations
b) Economies of scale and brand loyalty
c) Collusion and cartel formation
d) Perfect competition and price discrimination
Answer: b) Economies of scale and brand loyalty
114. **Duopoly and Stackelberg Model**:
Question: In the Stackelberg duopoly model, what distinguishes the two firms' decision-making?
a) Both firms make simultaneous quantity decisions.
b) The leader firm sets its output first, and the follower firm observes and reacts.
c) Both firms set their prices simultaneously.
d) The follower firm sets its price first, and the leader firm observes and reacts.
Answer: b) The leader firm sets its output first, and the follower firm observes and reacts.
115. **Monopolistic Competition and Product Differentiation**:
Question: What is a key strategy used by firms in monopolistic competition to achieve product differentiation?
a) Offering identical products
b) Focusing on low prices
c) Making products more homogeneous
d) Creating unique features or branding
Answer: d) Creating unique features or branding
116. **Oligopoly and Price Leadership**:
Question: What is tacit collusion, and why is it challenging to detect and regulate?
a) It involves explicit agreements among firms to set prices.
b) It is an open form of collusion that is easy to detect.
c) It is an informal coordination of prices without explicit agreements.
d) It results in perfect competition.
Answer: c) It is an informal coordination of prices without explicit agreements.
117. **Imperfect Market and Natural Monopoly**:
Question: What type of market structure is characterized by a single firm being the most efficient producer, resulting in no room for competition?
a) Oligopoly
b) Monopoly
c) Natural monopoly
d) Perfect competition
Answer: c) Natural monopoly
118. **Duopoly and Price Rigidity**:
Question: Why might firms in a duopoly exhibit price rigidity, where they are reluctant to change prices frequently?
a) To maximize profits through price leadership
b) To minimize competition
c) To avoid triggering price wars
d) To achieve perfect competition
Answer: c) To avoid triggering price wars
119. **Monopolistic Competition and Short-Run Equilibrium**:
Question: In the short run, when a firm in monopolistic competition earns economic profit, what is the relationship between price and average total cost?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: d) Price exceeds average total cost
120. **Oligopoly and Game Theory**:
Question: In the repeated prisoner's dilemma game played by oligopolistic firms, what strategy can encourage cooperation and discourage cheating?
a) Tit-for-tat
b) Perfect competition
c) Monopoly pricing
d) Price discrimination
Answer: a) Tit-for-tat
