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Economics multiple choice questions

GCSE and O level

Perfect Competition and Monopoly

Multiple Choice Questions and Answers

MCQ Questions:

1. 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

2. 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

3. 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

4. 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

5. 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 campaigns to discourage competition
D) It decides which retail outlets may sell and distribute its goods

6. 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

7. 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) Maximize output and profit
D) Reduce financial barriers to entry

8. 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

9. What may exist in a monopoly but not in perfect competition?
A) Barriers to entry
B) Identical products
C) Market price
D) Perfect knowledge


1. A
2. A
3. C
4. C
5. A
6. D
7. A
8. B
9. A

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