Senior Secondary (HKDSE) · Economics

Perfect competition and imperfect competition (monopolistic competition, oligopoly and monopoly) : Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Perfect competition and imperfect competition (monopolistic competition, oligopoly and monopoly) .

10 questions23 marksFree, no account

Question 1

1 mark

Which statement best describes the pricing behavior in an oligopoly?

Question 2

1 mark

In the long run, firms operating in a monopolistically competitive market typically earn only normal profits. Why is this the case?

Question 3

1 mark

In the case of a natural monopoly, which exists due to substantial economies of scale, regulating its price to achieve allocative efficiency ($$P = MC$$) often leads to a practical challenge. What is this challenge?

Question 4

1 mark

For a firm operating in a perfectly competitive market, the demand curve for its product is:

Question 5

1 mark

In an oligopolistic market, firms' decisions are highly interdependent. What does this interdependence primarily imply?

Question 6

2 marks

What is the defining characteristic of a firm operating as a price taker?

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Question 7

4 marks

Explain how product differentiation allows firms in monopolistic competition to have some control over their prices.

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Question 8

5 marks

Explain why allocative efficiency is achieved in a perfectly competitive market but not typically in a monopoly, even when the monopolist is profit-maximizing.

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Question 9

3 marks

Distinguish between a "price taker" and a "price searcher" in terms of their ability to influence market price. Provide one example of a market structure for each.

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Question 10

4 marks

Compare the level of consumer surplus in a perfectly competitive market with that in a single-price monopoly market, assuming similar cost structures for both. Explain the primary reason for any observed difference in consumer surplus.

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