Non Competitive Markets Class 12 Economics Important Questions

Please refer to Non Competitive Markets Class 12 Economics Important Questions with solutions provided below. These questions and answers have been provided for Class 12 Economics based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these problem solutions as it will help them to gain more marks in examinations. We have provided Important Questions for Class 12 Economics for all chapters in your book. These Board exam questions have been designed by expert teachers of Standard 12.

Class 12 Economics Important Questions Non Competitive Markets

MCQs

Question. The demand curve of oligopoly is?
a) Kinked
b) Vertical
c) Horizontal
d) Rising left to right

Question. In perfect competition, when the marginal revenue and marginal cost are equal, profit is?
a) Zero
b) Average
c) Maximum
d) Negative

Question. Which of the following type of competition is just a theoretical economic concept, not a realistic case where actual competition and trade take place?
a) Oligopoly
b) Monopoly
c) Monopolistic competition
d) Perfect competition

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

Question. The market structure in which the number of sellers is small and there is interdependence in decision making by the firms is known as
a) Oligopoly
b) Monopolistic competition
c) Monopoly
d) Perfect competition

Question. Marginal revenue for any quantity level can be measured by the slope of the total revenue curve.
a) False
b) True
c) Can’t say
d) None of these

Question. Oligopoly having identical products is known as
a) Pure oligopoly
b) Collusive oligopoly
c) Independent oligopoly
d) None of above

Very Short/Short Answer Type Questions

Question. Market for a necessary good is competitive in which the existing firms are earning supernormal profits. How can the policy of liberalisation by the government help in making the market more competitive in the interest of the consumers? Explain.
Answer : The policy of liberalization encourages new firms to enter the industry. This raises output of the industry as a whole. Total market demand remains unchanged and price starts falling. At the end result, consumers get goods at much cheaper price.

Question. Explain the effects of a ‘price floor’.
Answer : Buffer stock is an important tool in the hands of government to ensure price floor or minimum support price. If in case the market price is lower than what the government feels should be given to the farmers or producers.
This will make them purchase the commodity at higher price from the farmers or producers so as to maintain stock of the commodity with itself to be released in case of shortage of the commodity in future.

Long Answer Type Questions

Question. Distinguish between collusive and non-collusive oligopoly. Explain how the oligopoly firms are interdependent in taking price and output decisions.
Answer :  Below mentioned points focused on the difference between collusive and non-collusive oligopoly:-

Basis of Difference	Collusive Oligopoly	Non-collusive Oligopoly
Meaning	In this, firms decide to collude together and not to compete with each other	In this, firms do not collude but they compete with each other
Behaviour of firms	In this, all firms behave as a single entity or they show monopolistic behaviour	In this, all firms behave independent identity
Aim	This aims at maximising collective profits than individual profits	This aims at maximising own profits and decides how much quantity to be produced

Also under oligopoly, there is a high degree of interdependence between the firms.
Price and output policy of one firm has an important impact on the price and output policy of the rival firms in the market. Reason is there are few firms which are huge in size. When one company lowers its price, the rival firms may also lower the price to beat the competition. On the other side, if one company raises the price of a particular commodity, the rival firms may take decision accordingly. Companies while taking any decision on price and output, always keep in mind the possible reaction of the prevailing rival companies in the market.

Question. Explain the implications of the following:
(i) Products under monopolistic competition
(ii) Large number of sellers under perfect competition
Answer :
1. Implication when products are under monopolistic competition. It is a very distinct feature. A product is often differentiated by way of trade marks or brand name, size, quantity etc. the differentiated product are close substitutes of each other. E.g. Bagh bakri tea and Tajmahal tea. Because of product differentiation, each firm can decide its price policy independently.
So, each firm has a partial control over price of its product. This is done to attract buyers of rival companies. Also because these firms produce extra quantity, their products are different, they have always some loyal customer who buy these products and purchase them only.
2. When there are large number of sellers in the market. There are always more number of buyers and sellers in an economy. As a result, size of each economic agent is so small as compared to the market that they cannot influence the price through their individual actions.

Question. Explain the implications of the following features of perfect competition.
(i) Homogenous products
(ii) Freedom of entry and exit to firms.
Answer :
1. When there are homogenous products, its implications are great. This literally means the products are identical in nature, quality, size, shape and colour. So no producer is in a position to charge a different price of the product. A uniform price prevails in the market. In a perfectly competitive market, commodity must be always identical. Thus, it gives consumer or buyers absolutely no reason to prefer any particular product of one seller above another.
2. When there is freedom of entry and exit of firms. This completely depends on any firm when to exit or entry in the market. In this situation, firms in the long run can earn only normal profits, say TC=TR, AR=MR & P=MC. In extra cases, normal profits are earned, new firms will join the industry thus resulting in increase of market supply. Marek price will fall, extra normal profits will be wiped out. In case of extra normal losses, some of the exiting firms will leave the industry. Marek supply will decrease, and market price of that commodity will increase. Extra normal losses will be wiped out.