Top 50 multiple-choice questions (MCQs) with answers on the topic of market structure, covering perfect competition, monopoly, monopolistic competition, oligopoly, monopsony, and duopoly. These questions are suitable for various economics curricula including CBSE, IB, AP, and IGCSE:
1. In a perfectly competitive market, how many firms typically exist?
a) One
b) Few
c) Many
d) None
Answer: c) Many
2. Which market structure is characterized by a single seller with no close substitutes?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
3. In a monopolistic competition market, firms sell products that are:
a) Identical to competitors
b) Perfect substitutes
c) Differentiated
d) Homogeneous
Answer: c) Differentiated
4. Oligopoly is a market structure characterized by:
a) A large number of firms
b) A single seller
c) A few interdependent firms
d) Many differentiated products
Answer: c) A few interdependent firms
5. Which type of market structure is most likely to produce excess profits in the long run?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
6. In perfect competition, what happens to the price if a firm increases its output?
a) The price increases
b) The price decreases
c) The price remains unchanged
d) The price becomes unpredictable
Answer: c) The price remains unchanged
7. Which market structure features product differentiation and easy entry and exit for firms?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: c) Monopolistic Competition
8. A market with only two firms is called:
a) Monopoly
b) Oligopoly
c) Perfect Competition
d) Monopsony
Answer: b) Oligopoly
9. In a duopoly, how many firms dominate the market?
a) One
b) Two
c) Many
d) None
Answer: b) Two
10. A monopsony market is characterized by:
a) A single buyer
b) A single seller
c) Many buyers
d) Many sellers
Answer: a) A single buyer
11. In an oligopoly, firms are more likely to engage in:
a) Price wars
b) Collusion
c) Perfect competition
d) Monopolistic competition
Answer: b) Collusion
12. Which market structure results in the highest level of consumer choice?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: c) Monopolistic Competition
13. Which market structure has the least control over price by individual firms?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
14. Which market structure often leads to economies of scale for the dominant firm?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
15. In a monopolistic competition market, firms compete primarily on:
a) Price
b) Product differentiation
c) Collusion
d) Government regulation
Answer: b) Product differentiation
16. Which market structure tends to have the highest barriers to entry?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
17. What is the main characteristic of a cartel in an oligopoly market?
a) Firms compete aggressively
b) Firms cooperate to control prices
c) Firms merge to become one
d) Firms engage in perfect competition
Answer: b) Firms cooperate to control prices
18. Which market structure is the least common in the real world?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
19. Which market structure is likely to have the highest advertising expenses?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: c) Monopolistic Competition
20. Which market structure is most likely to lead to deadweight loss due to underproduction?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
21. In a perfectly competitive market, what happens if a firm charges a price above the market equilibrium?
a) It loses customers to competitors
b) It increases its market share
c) It maximizes profit
d) It goes out of business
Answer: a) It loses customers to competitors
22. A natural monopoly occurs when:
a) A single firm controls all resources
b) The government mandates a monopoly
c) Economies of scale make one firm the most efficient
d) There is perfect competition
Answer: c) Economies of scale make one firm the most efficient
23. In a duopoly, firms often engage in strategic decision-making to avoid:
a) Price competition
b) Collaboration
c) Monopolistic competition
d) Government regulation
Answer: a) Price competition
24. Which market structure is characterized by barriers to entry, making it difficult for new firms to enter the market?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
25. In a monopsony market, what happens to the price if a buyer reduces its purchases?
a) The price increases
b) The price decreases
c) The price remains unchanged
d) The price becomes unpredictable
Answer: b) The price decreases
26. Which market structure often results in product homogeneity?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
27. A cartel in an oligopoly market is likely to:
a) Encourage price competition
b) Discourage price competition
c) Lead to perfect competition
d) Have no effect on prices
Answer: b) Discourage price competition
28. Which market structure is characterized by mutual interdependence among firms?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: d) Oligopoly
29. Which market structure is most susceptible to the abuse of market power?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
30. In monopolistic competition, what is the demand curve for an individual firm’s product typically like?
a) Perfectly elastic
b) Perfectly inelastic
c) Relatively elastic
d) Relatively inelastic
Answer: c) Relatively elastic
31. Which market structure is characterized by a lack of close substitutes for a product?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
32. A market with many buyers and few sellers is called:
a) Perfect Competition
b) Monopoly
c) Monopsony
d) Oligopoly
Answer: d) Oligopoly
33. Which market structure often results in the highest level of consumer surplus?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
34. In a duopoly, what is the relationship between the two firms?
a) They cooperate to set prices
b) They compete aggressively on price
c) They merge to become one firm
d) They don’t interact with each other
Answer: a) They cooperate to set prices
35. In a monopsony, what is the buyer’s market power like?
a) Low
b) High
c) Moderate
d) Nonexistent
Answer: b) High
36. Which market structure is characterized by a differentiated product but limited control over price?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: c) Monopolistic Competition
37. What is the primary focus of firms in an oligopoly market?
a) Price competition
b) Quantity competition
c) Non-price competition
d) Perfect competition
Answer: c) Non-price competition
38. Which market structure is often associated with the highest level of economic profit in the short run?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: d) Oligopoly
39. A monopsony can lead to lower wages for:
a) Workers
b) Consumers
c) Suppliers
d) All of the above
Answer: a) Workers
40. What is the main characteristic of a perfectly competitive market?
a) Product differentiation
b) Barriers to entry
c) Many buyers and sellers
d) Price control by a single firm
Answer: c) Many buyers and sellers
41. Which market structure is most likely to result in a socially optimal level of output?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
42. In a monopolistic competition market, firms engage in:
a) Price wars
b) Collusion
c) Perfect competition
d) Non-price competition
Answer: d) Non-price competition
43. What is the main disadvantage of perfect competition for producers?
a) Limited control over prices
b) High barriers to entry
c) Low profits
d) Product homogeneity
Answer: c) Low profits
44. Which market structure is most likely to result in allocative inefficiency?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: b) Monopoly
45. What is the primary goal of firms in an oligopoly market?
a) Maximize market share
b) Maximize consumer surplus
c) Maximize profit
d) Maximize price competition
Answer: c) Maximize profit
46. Which market structure often results in excess capacity in the long run?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: c) Monopolistic Competition
47. In a monopsony, what is the relationship between the buyer and sellers?
a) Cooperative
b) Competitive
c) Independent
d) Dependent
Answer: b) Competitive
48. Which market structure is most likely to lead to product innovation and development?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: d) Oligopoly
49. In a duopoly, what is the strategic dilemma faced by firms?
a) Quantity competition
b) Collusion
c) Price competition
d) Government regulation
Answer: c) Price competition
50. In which market structure is the demand curve facing an individual firm perfectly elastic?
a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly
Answer: a) Perfect Competition
These questions should provide a comprehensive review of market structures, including perfect competition, monopoly, monopolistic competition, oligopoly, monopsony, and duopoly, for various economics curricula.