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 

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.