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Economics multiple choice questions

GCSE and O level

Perfect Competition and Monopoly

Multiple Choice Questions and Answers

What is correct about a monopoly?

A It may benefit from economies of scale
B It must be privately not state owned
C Its costs are always higher than those of a firm in perfect competition
D It sells only one product [J10/P1/Q22]

Answer is A

What is likely to be found when there are many small firms in an industry

A There are few barriers to entry
B There is high expenditure on research and development
C There is little competition
D Very large capital costs are needed to establish a firm (J10/P1/Q24]

Answer is A

What is unlikely to be a feature of a large firm in a monopoly position in a market?

A It achieves economies of scale
B It charges high prices
C It removes barriers to entry
D It will attract government attention [N10/P1/Q19]

Answer is C

A monopoly takes over an industry from competitive firms What is not likely to be true about the monopoly compared with a competitive firm?
A A monopoly will earn a higher rate of profit
B A monopoly will gain a greater share of the market
C A monopoly will offer a wider choice to the consumer,
D A monopoly will operate on a larger scale of production [J12/P1/Q22]

Answer is C

What is a possible advantage to the consumer of a monopoly supplier in a market?
A It achieves average costs which are lower than if there were many suppliers
B It achieves profits which are higher than if there were many suppliers
C It conducts advertising cam- paigns to discourage competition
D It decides which retail outlets may sell and distribute its goods [N12/P1/Q22]

Answer is A

Why is a firm in perfect competition a price taker?
A Demand for its product is perfectly inelastic
B Demand for its product is unaffected by changes in market conditions
C It is one of a small number of firms in the industry
D Its output is too small to have any effect on a proportion of the total market {J13/P1/Q17]

Answer is D

In a competitive industry, a firm’s aim is to become a monopoly supplier Which policy is it most likely to use to eliminate competition?

A adopt price reductions and advertising
B avoid diseconomies of scale
C maximise output and profit
D reduce financial barriers to entry [N13/P1/Q22]

Answer is A

Why might a government encourage a monopoly?
A It can have high average costs
B. It can compete against foreign firms
C It can prevent innovation
D It can make excessive profits ([N13/P1/Q25]

Answer is B

What may exist in monopoly but not in perfect competition?

A barriers to entry
B identical products
C market price
D perfect knowledge (J15/P1/Q12]

Answer is A

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