CBSE Class 12 Economics Forms of Market and Price Determination Assignment

MCQ Questions for NCERT Class 12 Economics National Income Accounting 

Question: GDP equals GNP, when
(a) the value of exports of goods equals the value of imports of goods
(b) the value of exports of goods and services equals the value of imports of goods and services
(c) there are no net factor income from abroad
(d) None of the above 

Answer: C

Question: GDP does not include
(a) government spending to clean up pollution caused by factories
(b) payments to technical consultants abroad
(c) additions to inventory stocks of intermediate goods
(d) None of the above

Answer: B

Question: Net factor income abroad is zero when
(a) factor income from abroad is equal to factor income to abroad
(b) factor income from abroad is more than factor income to abroad
(c) it can never be zero
(d) None of the above

Answer: A

Question: Income from buying and selling of financial assets is not included in the estimation of domestic income by
income method. Choose the correct reason for the same.
(a) These are paper claims and no actual production has happened
(b) It’s a transfer of ownership from one person to other
(c) These are not related to the current year’s production.
(d) Both (a) and (b) 

Answer: D

Question: If a country’s nominal GDP is constant, then which of the following statements about it would be correct?
(a) It is impossible for the real per capita GDP to rise in such circumstances
(b) The real per capita GDP can rise if and only if the country’s population is shrinking and prices are falling
(c) It is possible for the real per capita GDP to rise even if the country’s population is increasing
(d) None of the above 

Answer: C 

Question. Under monopoly, monopolist tries to increase his profits by restricting supply of his product and fixing
(a) low price
(b) high price
(c) market price
(d) All of these 

Answer: B

Question. Monopolist can determine ...... .
(a) price
(b) output
(c) Both (a) and (b)
(d) None of these

Answer: C

Question. The product sold by monopolist has
(a) many substitutes
(b) close substitutes
(c) no close substitutes
(d) perfect substitutes

Answer: C

Question. Which of the following is not an essential condition of pure competition?
(a) Large number of buyers and sellers
(b) Homogeneous product
(c) Freedom of entry and exit
(d) Absence of transport cost

Answer: D

Question. Imperfect competition is a type of market structure showing some but not all features of competitive market. Which of the following is/are imperfect competition?
(a) Perfect competition
(b) Monopolistic competition
(c) Oligopoly
(d) Both (a) and (b)

Answer: D

Question. In monopolistic competition, which relationship is true from the following between AR and MR?
(a) AR = MR
(b) AR < MR
(c) AR > MR
(d) None of these

Answer: C

Question. In perfect competition, as the firm is a price taker, the ...... curve is a horizontal straight line.
(a) marginal cost
(b) total cost
(c) total revenue
(d) marginal revenue

Answer: D

Question. An increase in supply with demand remaining the same bring about ...... .
(a) an increase in equilibrium quantity and decrease in equilibrium price
(b) an increase in equilibrium price and decrease in equilibrium quantity
(c) decrease in both equilibrium price and quantity
(d) None of the above

Answer: A

Question. Firm in a monopolistic market has ...... control over price.
(a) no
(b) full
(c) partial
(d) None of these

Answer: C

Question. Under what condition, equilibrium price will increase and equilibrium quantity will decrease?
(a) Increase in supply
(b) Decrease in supply
(c) Increase in demand
(d) Decrease in demand

Answer: B

Question. An increase in demand with unchanged supply leads to ...... .
(a) rise in equilibrium price and fall in equilibrium quantity
(b) fall in both equilibrium price and quantity
(c) rise in both equilibrium price and quantity
(d) fall in equilibrium price and rise in equilibrium quantity

Answer: C

Question. If price is forced to stay below equilibrium price, then ...... .
(a) excess supply exists
(b) excess demand exists
(c) Either (a) or (b)
(d) Neither (a) nor (b)

Answer: B

Question. Which forms of market sells homogenous goods?
(a) Perfect competition
(b) Monopolistic competition
(c) Both (a) and (b)
(d) None of the above

Answer: A

Question. Monopolistic competition combines the features of following market
(a) Perfect competition and Monopoly
(b) Monopoly and Oligopoly
(c) Perfect competition and Oligopoly
(d) Perfect competition, Monopoly and Oligopoly market

Answer: A

Question. ...... is a situation of the market in which demand for a commodity is exactly equal to its supply corresponding to a particular price.
(a) Consumer equilibrium
(b) Producer equilibrium
(c) Market equilibrium
(d) Balance of trade

Answer: C

Question. If the market supply is less than the market demand of a commodity at a given price, it is called
(a) excess supply
(b) excess demand
(c) deficit demand
(d) market supply

Answer: B

Question. Mobile phone industry in India belongs to which form of market?
(a) Perfect competition
(b) Monopoly market
(c) Monopolistic competition
(d) Oligopoly market

Answer: C

Question. Which is the best example of monopoly market?
(a) Communication market
(b) Indian railway
(c) Stock exchange
(d) OPEC (Oil Producing Export Countries)

Answer: B

Question. What is the impact of change in supply on market equilibrium when demand is perfectly inelastic?
(a) Both equilibrium price and equilibrium quantity will change
(b) Both equilibrium price and equilibrium quantity will not change
(c) Equilibrium price remains same and equilibrium quantity will change
(d) Equilibrium price will change and equilibrium quantity remains same

Answer: D

Question. Equilibrium price may be determined through ..... .
(a) only demand
(b) only supply
(c) both demand and supply
(d) None of the above

Answer: C

Question. Which of the following are true about perfect competition?
(a) Infinitely large number of buyers and sellers
(b) Perfect substitute goods
(c) No price control by buyers or sellers
(d) All of the above

Answer: D

Question. Which of the following is/are the features of monopolistic competition?
(a) Product differentiation
(b) Selling cost
(c) Both (a) and (b)
(d) None of the above

Answer: A

Question. ………… is/are the consequences of freedom of entry and exit of firms under perfect competition.
(a) Firms are price takers
(b) Normal profit in long run
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Answer: B

Question. Which of the following is/are broad market forms based on the level of competition?
(i) Perfect competition
(ii) Imperfect competition
(iii) Monopolistic competition
(iv) Oligopoly competition
Choose the most appropriate option
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (iii) and (iv)
(d) (i), (ii) and (iii)

Answer: A

Question. Practise of price discrimination is observed under which of the following market forms?
(a) Monopoly
(b) Monopolistic competition
(c) Both (a) and (b)
(d) None of these

Answer: A

Question. Identify the correct statement of the given below
(a) Demand curve under monopoly is flatter than monopolistic competition due to freedom of entry and exit of firms
(b) Demand curve under monopolistic competition is flatter than monopoly market due to homogenous goods under monopolistic competition
(c) Demand curve under monopoly is flatter than monopolistic competition due to heterogeneous goods under monopolistic competition
(d) Demand curve under monopoly market is steeper than monopolistic competition as goods under monopoly market has no substitutes available

Answer: D

Question. Which of the following is/are causes of emergence of monopoly?
(a) Government licensing
(b) Patents and Copyright
(c) Natural monopoly
(d) All of the above

Answer: D

Question. Xerox was the first company which invented photocopier machine; it enjoyed Monopoly for about 15 years. This is an example of
(a) Licensed monopoly
(b) Patented monopoly
(c) Natural monopoly
(d) None of the above

Answer: B

Question. ………… form of market demand curve is perfectly elastic in nature.
(a) Perfect competition
(b) Monopoly market
(c) Monopolistic market
(d) Oligopoly market

Answer: A

Question. Indian Railways in India is an example of ……… .
(a) Licensed monopoly
(b) Patented monopoly
(c) Natural monopoly
(d) None of the above

Answer: C

Question. Selling cost is a unique feature of monopolistic competition, wherein firms incur huge sums on promotional activities. Choose the most appropriate reason for the same.
(a) Large number of buyers and selle
(b) Differentiated goods
(c) Freedom of entry and exit of firms
(d) All of the above

Answer: B

Question. Which of the following forms of price discrimination is usually followed by social utility service providers?
(a) Individual price discrimination
(b) Block/Unit price discrimination
(c) Geographical price discrimination
(d) None of the above

Answer: B

Question. Which of the following is/are the features of monopoly form of market?
(a) Restrictions on entry of new firms
(b) No close substitutes
(c) Full control over price
(d) All of the above

Answer: D

Question. Which of the following is/are the assumptions of equilibrium?
(a) Demand curve should always has a negative slope.
(b) Supply curve should alwayus has a positive slope.
(c) Both ((a) and ((b)
(d) None of the above

Answer: C

VERY SHORT ANSWER TYPE QUESTIONS (1 MARK)

Question. Define market.
Answer: Market is a system with the help of it the buyers and seller of a commodity or service come to contact with each other.

Question. Under which form of market the firm is price taker.
Answer: Perfect competition.

Question. Define equilibrium price.
Answer: It is the price at which demand = supply.

Question. When does the situation of excess supply arise?
Answer: When market price is more than equilibrium price and market supply is more than market demand.

Question. What is cartel?
Answer: A cartel is a group of firms which jointly set ‘output and price’ policy of its product in such a way so as to reap benefits of monopoly. 

Question. What do you mean by homogenous product?
Answer: It means product produced by different firms is identical in all respect like quality, colour, size, weight etc. such products are perfect substitutes.

MONOPOLY MARKET
❑ Monopoly is that type of market where there is a single seller, selling a product which does not have close substitutes.
❑ Under monopoly, due to absence of free entry and exit, firm earn abnormal profit in the long run.
❑ Under monopoly, monopolist himself determines price of the product according to the elasticity of demand as he has full control over the supply of the product.
❑ Under monopoly elasticity of demand for the good is less than one, therefore, demand curve has steeper slope. (Ed < 1).
❑ Under monopoly, average revenue and marginal revenue has negative slope, as per unit price falls with increase in output sold.
❑ A monopolist may charge different price from different buyers for the same good it is called price discrimination.

MONOPOLISTIC COMPETITION
❑ Monopolistic competition is that type of market in which there are large number of firms, sell differentiated product to the consumers who have imperfect knowledge about the product and there is tough competition between firms.
❑ Under monopolistic competition due to lack of control over supply each firm determines the price of their product, keeping in view the price level set by other firms.
❑ Under monopolistic competition elasticity of demand for the product is greater than one therefore demand curve (AR curve) has flatter slope.
❑ Each firm has to incur selling costs (expanditure on advertisement etc.) to promote its sales. This is because, there is a large number of close substitute available in the market.

OLIGOPOLY
❑ Oligopoly is the form of market in which there are few sellers. All the firms produce a certain amount of output of total market supply.
❑ All the firms under oligopoly produce homogenous or differentiated product.
❑ Under oligopoly entry of firms is not restricted but difficult.
❑ Under oligopoly demand curve is undefined.
❑ All the firms are interdependent in respect of price determination under oligopoly market.
❑ On the basis of production, oligopoly can be categorised in two categories.
(i) Collusive oligopoly is that form of oligopoly in which all the firms determine price and quantity of output on the basis of cooperative behaviour.
(ii) Non-collusive oligopoly is that form of oligopoly is which all the firms determine the price and quantity of output according to the action and reaction of the firms.

❑ Equilibrium Price : Which corresponds to the equality between market demand and market supply of a commodity.
❑ Equilibraium quantity which corresponds to the equilibrium price in the market.
❑ Market equilibrium is a state in which market demand is equal to market supply. There is no excess demand and excess supply in the market.

VERY SHORT ANSWER TYPE QUESTIONS 

Question. How is price determined under perfect competition?
Answer: Price is determined by an industry by the forces of demand and supply.

Question. What is the common feature shared by perfect and monopolistic competition?
Answer: (i) Free entry and exit of firms
(ii) Perfect mobility of factors.

Question. If the firms are earning abnormal profits, how will the number of firms in the industry change?
Answer: The number of firms in the industry will increase.

Question. Define the monopoly market.
Answer: It is a form of market under which there is a single seller, selling a product which does not have close substitutes.

Question. Under which market there is no difference between firm and industry?
Answer: Monopoly.

Question. What is normal profit?
Answer: It is the minimum profit which a firm must get to stay in business.

Question. Under which form of market the firm is price taker.
Answer: Perfect competition.

Question What is cartel?
Answer: A cartel is a group of firms which jointly set ‘output and price’ policy of its product in such a way so as to reap benefits of monopoly.

Question. What is the relationship between AR curve and demand curve in a monopoly market?
Answer: Both AR curve and demand curve are the same in a monopoly market. 

Question. What do you mean by price discrimination?
Answer: Price discrimination is a policy under which a seller sells a similar product at different prices to different buyers.

Question. Define oligopoly.
Answer: Oligopoly is a market structure where there are few firms competing for their homogenous or differentiated products.

Question. Define equilibrium price.
Answer: It is the price at which demand = supply. 

Question. When does the situation of excess supply arise?
Answer: When market price is more than equilibrium price and market supply is more than market demand.

Question. What will be the effect on equilibrium price when increase in demand is more than increase in supply?
Answer: When increase in demand is more than increase in supply, equilibrium price will increase.

Question. Under what situation does the equilibrium price remains unaffected when there is simultaneous increase in demand and supply.
Answer: When increase demand is equal to increase in supply the equilibrium price will remain same.

Question. What is the relation between average revenue curve and demand curve under monopolistic competition?
Answer: Both AR and MR curves have negative slope.