Question:
What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?
Answer:
- The reason why firm in monopolistic competition earns zero profit in the long run is free entry and exit of firm.
- If firm earns super-normal profits in the short run then new entry will take place in the long run. If the firm is incurring losses in the short run, firm will leave in the long run.
- The result is zero abnormal profits in the long run.
Non-Competitive Markets
Q 1.
What is the importance of monopoly?
Q 2.
Which features of monopolistic competition are competitive in nature?
Q 3.
What is a price-maker firm?
Q 4.
Under monopoly a firm sells the goods at a single price.
Q 5.
Under monopolistic competition there is only one seller of the product.
Q 6.
Demand curve facing a monopoly firm is a constraint for the monopolist."Comment.
Q 7.
Which features of monopolistic competition are monopolistic in nature?
Q 8.
Under oligopoly, there are large number of buyers and sellers.
Q 9.
What is the value of MR when the demand curve is elastic?
Q 10.
Under which market form, firm is a price-maker?
Q 11.
Why is the demand curve under monopoly less elastic as compared to the demand curve under monopolistic competition?
Q 12.
Define product differentiation.
Q 13.
Why AR curve (demand curve) under monopolistic competition is more elastic than AR curve under monopoly?
Q 14.
Explain the main features of barriers to the entry of firms.
Q 15.
What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?
Q 16.
How many firms are there in a monopoly market?
Q 17.
List the three different ways in which oligopoly firms may behave.
Q 18.
Giving reasons, state whether the following statements are true or false.
Under monopoly all firms can sell at any price.
Q 19.
Because of product differentiation under monopolistic competition, price tends to be higher than what it ought to have been in real terms and hence consumers suffer. How?
Q 20.
Price discrimination should be socially desirable. How?
Q 21.
Under oligopoly though firms are free to take decisions about price and quantity to be sold but they do not change the price and hence buyers are deprived of the benefit of fall in price. Comment.
Q 22.
What are the shapes of AR and MR curves under monopoly?
Q 23.
Give reasons for the following statements:
- Demand curve facing a perfectly competitive firm is a horizontal straight line.
- Demand curve facing a monopolistic competitive firm is a downward sloping curve.
- Demand curve facing a monopoly firm is less elastic than that curve facing a monopolistic competitive firm.
Q 24.
Under monopoly new firms can enter the industry to raise the supply.
Q 25.
How to reduce the incidence of selling cost under monopolistic competition because of which price tends to be higher than what it would have been if production cost would have been the sole basis?
Q 26.
What does Monopolistic Competition mean?
Q 27.
Give reasons for the following statements:
- A perfectly competitive firm is a price-taker.
- Product differentiation is a characteristic feature of a monopolistic competitive market,
- A monopolist cannot fix both the quantity that he likes to produce and the price at which he would like to sell.
Q 28.
In monopoly, firm is different from industry.
Q 29.
In spite of having monopoly why the Indian Railways has not increased the fare for many years?
Q 30.
Compare between perfect competition and monopoly.
Q 31.
Explain the implication of the following: The feature of no close substitutes' under monopoly.
Q 32.
Although there are few (more than one) firms in oligopoly. Even these firms can enjoy monopoly power. How?
Q 33.
How the efficiency may increase if two firms merge?
Q 34.
Under monopolistic competition, all the customers have perfect knowledge of the market conditions.
Q 35.
Under monopolistic competition, a firm faces a perfectly elastic demand curve.
Q 36.
What is meant by prices being rigid? How can oligopoly behaviour lead to such an outcome?
Q 37.
Give the meaning of Oligopoly'.
Q 38.
"A day without selling costs is nearly impossible". Comment.
Q 39.
Explain the feature of few firms in an oligopoly market.
Q 40.
In which form of market there is product differentiation?
Q 41.
What do you mean by duopoly?
Q 42.
If the firm in the toothpaste industry have the following market shares, which market structure would best describe the industiy? [1 Mark]
Q 44.
Selling cost is a nail in the coffin of consumer's sovereignty. How?
Q 45.
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped?
Q 46.
A monopolist can sell any quantity he likes at a price. Give reasons with true or false.
Q 47.
Discuss the relationship between total revenue, average revenue and marginal revenue under perfect competition and monopolistic competition. Use diagrams.
Q 48.
Suppose that the demand curve for the XYZ company slopes downward and to the right. Would you conclude that the firm is a price taker or a price maker? Give reasons.
Q 49.
Draw a demand curve in different market situation and also compare its elasticity of demand.
Q 50.
Average revenue will always be equal to marginal revenue in all market conditions. Defend or refute.
