The City School
E-11 Campus, Islamabad
Name: ___________________ Date : _________________ Time allowed: 60 min
Subject: Economics Class: A2 Unit:2 Total Marks: 30
Section A: MCQs [5]
1) Imperfect competition is distinguished from perfect competition in that, in long-run equilibrium,
A. supply is elastic.
B. demand is inelastic.
C. marginal cost will be below average cost.
D. average revenue will be below marginal revenue.
2) The diagram shows the cost and revenue curves of a firm. What does the diagram represent?
A. a firm in monopolistic competition making normal profit
B. a firm in monopolistic competition making short-term losses
C. a firm in perfect competition at long-run equilibrium
D. a monopoly making abnormal profits
3) The dominant firm in an oligopoly sets up a research institute to carry out new product development.
Which two features of oligopoly are present in this project?
A. creation of barriers to entry and collusion
B. creation of barriers to entry and non-price competition
C. non-price competition and price leadership
D. price leadership and collusion
4) What is the defining characteristic of an oligopolistic industry?
A. Contestability
B. large numbers of firms
C. mutual interdependence
D. price rigidity
5) The list provides characteristics of the market in which firm X operates
● Firms in the market spend a lot of money on advertising.
● Firms in the market experience a high level of uncertainty.
● Start-up costs for new firms entering the market are relatively high.
● The largest five firms in market control 85% of total sales. In which market structure is firm X operating?
A. Monopoly
B. monopolistic competition
C. oligopoly
D. perfect competition
Q2 (a) Explain how a firm maximises its profit in perfect competition. [12]
(b) Discuss what economic theory suggests are the characteristics and possible behaviour of firms in an
oligopolistic market. [13]
.
1. C
2. D
3. b
4. C
5. C
Q2 Explain what is meant by a normal good and comment on the link between total utility, marginal utility
and a consumer’s demand curve for that good. [10]
