Forms of Market - Price floor

1. 1.If a perfectly competitive firm sets its price higher than the market price, what will happen?
   
   
   
   

• a) It will attract more customers

• b) It will lose all customers to competitors

• c) It will be able to sell at a higher profit margin

• d) Consumers will buy more of the product

2.If the price of raw materials used in production suddenly increases, how will a perfectly competitive firm respond in the short run?

• a) Increase its own price to cover costs

• b) Stop production immediately

• c) Continue operating if the price covers average variable cost

• d) Charge consumers more for higher quality

3.A price floor on sugarcane is set above the equilibrium price. What measure can the government take to prevent surplus sugarcane from going to waste?

• A) Encourage farmers to reduce production

• B) Purchase the excess sugarcane

• C) Allow the price to adjust freely

• D) Impose a tax on sugarcane producers

4.If a perfectly competitive firm's marginal revenue is lower than marginal cost, it should:

• a) Increase production

• b) Decrease production

• c) Keep production constant

• d) Reduce prices

5.If firms in monopolistic competition raise prices too much, what is likely to happen?

• a) Customers will shift to substitutes

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  b) Competitors will also raise prices

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  c) The government will force price reductions

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  d) Consumers will have no alternative but to buy

6.Which of the following industries is most likely to be affected by a price floor set by the government?

• A) Fast food restaurants

• B) Agricultural produce markets

• C) Technology startups

• D) Luxury car manufacturers

7.How does a monopoly affect consumers?

• a) Consumers benefit from lower prices

• b) Consumers pay higher prices with fewer choices

• c) Consumers have multiple product options

• d) The government ensures fair pricing

8. 8.A monopolistic competitor introduces a loyalty program. What is the likely impact?
   
   
   
   

• 8. a) Customers will be more loyal and less price-sensitive

• 8. b) The firm will face more competition

• 8. c) The firm will become a monopoly

• 8. d) Demand will become more elastic

9.If a monopoly raises prices significantly, what is a possible consequence?



d) Demand will increase

• a) Customers may stop buying or seek alternatives

• b) More firms will enter the market

• c) The government will provide subsidies

• d) Demand will increase

The government imposes a price floor on milk to ensure dairy farmers earn a fair income. Which of the following is a likely consequence of this policy?

• A) Shortage of milk in the market

• B) Increase in milk consumption

• C) Excess supply of milk

• D) Equilibrium price remains unchanged