MCQ Questions Chapter 4 The Theory of Firm Under Perfect Competition Class 12 Economics

Please refer to MCQ Questions Chapter 4 The Theory of Firm Under Perfect Competition Class 12 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Economics issued for the current academic year. We have provided MCQ Questions for Class 12 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 4 The Theory of Firm Under Perfect Competition in Class 12 Economics provided below to get more marks in exams.

Chapter 4 The Theory of Firm Under Perfect Competition MCQ Questions

Please refer to the following Chapter 4 The Theory of Firm Under Perfect Competition MCQ Questions Class 12 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 4 The Theory of Firm Under Perfect Competition Class 12 Economics

Question. Which is a characteristic of the market ?
a) One Area
b) Presence of both Buyers and Sellers
c) Single Price of the Commodity
d) All the above 

Question. In perfect competition, in the long run, ______________?
a) There are large profits for the firm
b) There is no profit and no loss for the firm
c) There are negligible profits for the firm
d) There are large losses for the firm 

Question. In perfect competition, the elasticity of demand for the product of a single firm is
a) infinite, because many other firms produce identical products.
b) zero, because many other firms produce identical products.
c) zero, because the firm produces a unique product.
d) infinite, because the firm produces a unique product.

Question. Price of a goods is determined at a point where :
a) Demand > Supply
b) Demand < Supply
c) Demand = Supply
d) None of these

Question. In perfect competition, a firm:
a) Determines price
b) Obtains price
c) Both a) and b)
d) None of these

Question. If demand for a seller’s product is perfectly elastic, which of the following is correct?
a) There is no incentive to sell at a price below the market price.
b) It will not sell any output at all if it tries to price its product above the market price.
c) There are a very large number of perfect substitutes for the seller’s product.
d) All of the above answers are correct

Question. If the slope of the long-run supply curve for a perfectly competitive industry is positive, the industry experiences
a) internal economies.
b) external economies.
c) external diseconomies.
d) internal diseconomies

Question.Total economic profit is
a) total revenue minus total opportunity cost.
b) marginal revenue minus marginal cost.
c) total revenue divided by total cost.
d) marginal revenue divided by marginal cost.

Question. If you have found the percentage of the value of sales accounted for by the four largest firms in an industry, you have found the
a) elasticity of supply value.
b) Herfindahl-Hirschman Index.
c) elasticity of demand value.
d) four-firm concentration ratio.

Question. In the above table, the firm
a) must be in a perfectly competitive industry, because its marginal revenue is constant.
b) cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero.
c) cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero.
d) must be in a perfectly competitive industry, because its marginal cost curve eventually rises

Question. Which of the following is the best example of a natural monopoly?
a) owning the only licensed taxicab in town
b) the United States Postal Service
c) ownership of the only ferry across Puget Sound for twenty miles
d) the cable television company in your hometown

Question. Which of the following is NOT correct about patents?
a) Patents stimulate innovation.
b) A patent is a barrier to entry.
c) Patents enable a firm to be a permanent monopoly.
d) Patents encourage invention of new products.

Question. For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm’s marginal cost (Mc) and its marginal revenue (MR) on the vertical axis. The firm’s profit-maximizing quantity occurs at the point where the
a) MC curve intersects the MR curve from above, going from left to right.
b) slope of the MC curve is zero.
c) MC curve intersects the MR curve from below, going from left to right.
d) MC and MR curves are parallel.

Question. A perfectly competitive firm’s marginal cost exceeds its marginal revenue at its current output. To increase its profit, the firm will
a) increase its output.
b) raise its price.
c) lower its price.
d) decrease its output.

Question. The concept of supply curve is relevant only for?
a) Monopoly
b) Monopolistic competition
c) Perfect competition
d) Oligopoly

Question. In perfect competition, since the firm is a price taker, the ________ curve is straight line
a) Total cost
b) Marginal cost
c) Total revenue
d) Marginal revenue

Question. In the short run, a perfectly competitive firm can
a) earn a normal profit.
b) incur an economic loss.
c) earn an economic profit.
d) earn an economic profit, earn a normal profit, or incur an economic loss. 

Question.The demand for a product produced in a perfectly competitive market permanently increases. In the short run the price
a) rises and each firm produces less output.
b) does not change because each firm produces more output.
c) rises and each firm produces more output.
d) does not change as new firms enter the industry.  

Question. A firm that shuts down and produces no output incurs a loss equal to its
a) marginal costs.
b) total fixed costs.
c) total variable costs.
d) marginal revenue.

Question. In perfect competition, which of the following curves generally lies below the demand curve and slopes downward?
a) Average revenue
b) Average cost
c) Marginal revenue
d) Marginal cost

Question. Perfect competition is an industry with
a) a few firms producing identical goods.
b) many firms producing goods that differ somewhat.
c) a few firms producing goods that differ somewhat in quality.
d) many firms producing identical goods.

Question.Firms use marketing to
a) influence a consumer’s buying decision.
b) convince customers that their product is worth its price.
c) persuade buyers that their product is superior to others.
d) All of the above answers are correct.

Question. The elasticity at a point on a straight line supply curve passing through the origin will be
a) 3.0
b) 1.0
c) 4.0
d) 2.0 

Question. Which of the following would create a natural monopoly?
a) requirement of a government license before the firm can sell the good or service
b) technology enabling a single firm to produce at a lower average cost than two or more firms
c) an exclusive right granted to supply a good or service
d) ownership of all the available units of a necessary input

Question. Which one is a feature of monopolistic competition ?
a) Differentiated Product
b) Selling Cost
c) Imperfect Knowledge of the Market
d) All the above

Question. Which of the following is an example of perfect competition?
a) Agriculture
b) Banking sector
c) Car manufacturing
d) Railways

Question. In perfect competition, a firm earns profit when __________ exceeds the _____________?
a)Total revenue, total fixed cost
b)Marginal cost, marginal revenue
c)Average revenue, average cost”
d)Total cost, total revenue

Question. The short-run supply curve for a perfectly competitive firm is its
a) marginal cost curve above the horizontal axis.
b) average cost curve above the horizontal axis.
c) average cost curve above its shutdown point.
d) marginal cost curve above its shutdown point.

Question. The figure represents a firm in a perfectly competitive market. If the firm does not shut down, the least amount of output that it will produce is
a) 10 units.
b) 8 units.
c) 5 units.
d) less than 5 units

Question. Which of the following market types has a large number of firms that sell similar but slightly different products?
a) perfect competition
b) oligopoly
c) monopolistic competition
d) monopoly

Question. In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm’s short-run decision?
a) what price to charge buyers for the product
b) whether or not to enter or exit an industry
c) the profit-maximizing level of output
d) how much to spend on advertising and sales promotion

Question. In a perfectly competitive industry, the industry supply curve is the sum of the
a) average total cost curves of all the individual firms.
b) supply curves of all the individual firms.
c) average variable cost curves of all the individual firms.
d) average fixed cost curves of all the individual firms.

Question. Firms face competition when the good they produce
a) is in a market with natural barriers to entry.
b) is unique.
c) is in a market with legal barriers to entry.
d) has a close substitute.

Question. All of the following are examples of product differentiation in monopolistic competition EXCEPT
a) new and improved packaging.
b) lower price.
c) acceptance of more credit cards than the competition.
d) location of the retail store.

Question.Suppose the cost curves in the above figure apply to all firms in the industry. If the initial price is P1, firms are
a) making an economic profit and some firms will leave the industry.
b) incurring an economic loss and some firms will leave the industry.
c) making an economic profit and some firms will enter the industry.
d) incurring an economic loss and some firms will enter the industry.

Question. Market situation where there is only one buyer is:
a) Monopoly
b) Monopsony
c) Duropoly
d) None of these

Question.The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm
a) has perfect information.
b) wants to maximize its profits.
c) is a price taker.
d) faces constant returns to scale

Question. In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue is
a) $90.
b) $30.
c) $105.
d) $15.

Question. Can TR be a horizontal Straight line?
a) May be
b) Can’t say
c) Yes
d) No

Question. Which of the following market types has all firms selling products so identical that buyers do not care from which firm they buy?
a) perfect competition
b) oligopoly
c) monopolistic competition
d) monopoly

Question. If the cost curves shown in the above figure apply to all firms in the industry and the initial price is P1, in the long run the price will be
a) greater than P1.
b) zero.
c) equal to P1.
d) less than P1

Question. External economies are factors beyond the control of an individual firm that ________ as the total industry output increases.
a) raise its marginal revenue
b) raise its costs
c) lower its costs
d) lower its profit

Question. Among the obstacles to the efficient allocation of resources are all of the following EXCEPT
a) competition.
b) monopoly.
c) external benefits.
d) external costs.

Question. An industry with a large number of firms, differentiated products, and free entry and exit is called
a) oligopoly.
b) monopoly.
c) monopolistic competition.
d) perfect competition.

Question.While a seller under perfect competition equates price and MC to maximize profits a monopolist should equate?
a) MR and MC
b) AR and MR
c) AR and MC
d) TC and TR

Question. Based on the table above which shows Chip’s costs, if rice sells for $600 a ton, Chip
a) earns an economic profit, but should shut down in the short run.
b) incurs an economic loss, but should stay open in the short run.
c) incurs an economic loss and should shut down in the short run.
d) earns an economic profit and should stay open in the short run.

Question. Which of the following is different about perfect competition and monopolistic competition?
a) Firms in monopolistic competition compete on their product’s price as well as its quality and marketing.
b) In monopolistic competition, entry into the industry is unblocked.
c) Perfect competition has a large number of independently acting sellers.
d) Only firms in monopolistic competition can earn an economic profit in the short run.

Question. Which statement is correct ?
a) In very short period, supply is perfectly inelastic, price is affected by both demand conditions.
b) Supply curve elasticity depends on time period
c) Both a) and b)
d) None of the above

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