Economics - Practice Test | ExamPrepSheets

[#646] Which of the following is a criticism of the theory of monopolistic competition?

(A) It is difficult to define a monopolistically competitive market and to determine the firms and products that comprise it

(B) When product differentiation is slight, each firm's demand curve is nearly horizontal so the perfectly competitive solution provides an adequate approximation to the monopolistically competitive solution

(C) When there are strong brand preferences and few producers of many differentiated products, or when there are many producers but only a few compete as rivals for any given consumer, the oligopoly solution then provides an adequate approximation to the monopolistically competitive solution

(D) All of the above

Correct Answer

(D) All of the above

[#647] When the law of demand operates the demand curve

(A) slopes downward from left to right

(B) slopes upward from left to right

(C) slopes upward from right to left

(D) parallel to horizontal axis

Correct Answer

(A) slopes downward from left to right

[#648] Assertion (A) A perfectly competitive firm is not a market but is a price taker. Reason (R) The firm is intereshed in deciding the level of output only.

(A) Both (A) and (R) are true

(B) Both (A) and (R) are false

(C) (A) is false, but (R) is true

(D) (A) is true, but (R) is not a correct explanation of (A)

Correct Answer

(D) (A) is true, but (R) is not a correct explanation of (A)

[#649] Which one of the following statement is true?

(A) In case of inferior goods, the income effect is negative, although the substitution effect is positive

(B) In inferior goods, the income and substitution effect is positive

(C) In inferior goods, the income and substitution effect are negative

(D) In case of inferior goods, the income effect is positive, although the substitution effect is negative

Correct Answer

(A) In case of inferior goods, the income effect is negative, although the substitution effect is positive

[#650] According to Schumpeter the entrepreneur makes economic profit because

(A) He is an innovator

(B) All his risks are insurable

(C) The uncertainity is reduced

(D) Most of his decisions are non-routine

Correct Answer

(A) He is an innovator

Economics - Study Mode

[#646] Which of the following is a criticism of the theory of monopolistic competition?

Correct Answer

[#647] When the law of demand operates the demand curve

Correct Answer

[#648] Assertion (A) A perfectly competitive firm is not a market but is a price taker. Reason (R) The firm is intereshed in deciding the level of output only.

Correct Answer

[#649] Which one of the following statement is true?

Correct Answer

[#650] According to Schumpeter the entrepreneur makes economic profit because

Correct Answer