SSC CGL Finance – Forms of Market & Price Determination – Level 2 · Exam Level · Paper III Sprint

← Back

SSC CGL Finance – Forms of Market & Price Determination – Level 2 · Exam Level · Paper III Sprint – 16 questions, subject: Finance & Economics (Tier II Paper III). Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.

Get daily current affairs & exam alerts – follow us YouTube WhatsApp Channel Telegram Channel Facebook Page Instagram
Share with friends & study groups
Link to this page from your website / blog (HTML code)
1.  
A monopolist faces P = 120 − 3Q and has a constant MC = AC = ₹ 30. Its profit-maximising price is:

Correct Answer: A [₹ 75]

Explanation:

MR = 120 − 6Q = 30 → Q = 15 → P = 120 − 45 = 75.

2.  
Statement-basedWhich is/are correct?
I. A monopolist always earns supernormal profit in the short run.
II. A monopolist never produces on the inelastic part of its demand curve.

Correct Answer: B [Only II]

Explanation:

A monopolist can make a loss if demand is weak; MR < 0 where demand is inelastic, so it avoids that part.

3.  
Match the followingMatch the market with the firm's demand curve:
P. Perfect competition Q. Monopoly R. Non-collusive oligopoly
1. Kinked 2. Perfectly elastic 3. The downward-sloping market demand curve

Correct Answer: C [P-2, Q-3, R-1]

Explanation:

Monopolist is the industry, so it faces the market demand curve.

4.  
Assertion–Reason
A: Firms under monopolistic competition work with excess capacity in the long run.
R: In long-run equilibrium the downward-sloping AR curve touches LAC to the left of its minimum point.

Correct Answer: D [Both A and R are true and R explains A]

Explanation:

Tangency on the falling part of LAC → output below the minimum-cost output.

5.  
Market shares of four firms are 40%, 30%, 20% and 10%. The Herfindahl–Hirschman Index (HHI) is:

Correct Answer: D [3000]

Explanation:

40² + 30² + 20² + 10² = 1,600 + 900 + 400 + 100 = 3,000.

6.  

Directions (next question): Two cement firms A and B each choose a High or Low price. Profits (₹ crore) as (A, B):

B: High B: Low
A: High (60, 60) (25, 80)
A: Low (80, 25) (35, 35)
Data tableIf each firm acts alone to maximise its own profit, the outcome (Nash equilibrium) is:

Correct Answer: A [Both choose Low; each earns ₹ 35 crore]

Explanation:

Low is a dominant strategy for each (80 > 60 and 35 > 25) → (Low, Low): the prisoner's dilemma.

7.  
A competitive firm has TC = 50 + q² (so MC = 2q). If price is ₹ 30, its profit is:

Correct Answer: C [₹ 175]

Explanation:

P = MC → q = 15; TR 450 − TC 275 = 175.

8.  
Odd one outwhich is NOT a feature of perfect competition?

Correct Answer: B [Product differentiation]

Explanation:

Differentiation belongs to monopolistic competition.

9.  
A discriminating monopolist with MC = ₹ 12 sells in market A (elasticity 3) and market B (elasticity 4). The price in market A is:

Correct Answer: D [₹ 18]

Explanation:

P = MC/(1 − 1/e) = 12/(2/3) = 18 (B: 12/0.75 = 16).

10.  
Two-quantity comparisonTwo-quantity comparison (P = 80 − 4Q, MC = ₹ 16):
Quantity I: monopoly output
Quantity II: half of the perfectly competitive output

Correct Answer: C [Quantity I = Quantity II]

Explanation:

Monopoly: 80 − 8Q = 16 → Q = 8; competitive: 80 − 4Q = 16 → Q = 16 → half = 8.

11.  
One-line fact recall'The Theory of Monopolistic Competition' (1933) was written by:

Correct Answer: A [Edward Chamberlin]

Explanation:

Joan Robinson wrote 'The Economics of Imperfect Competition' in the same year.

12.  
Trick SpotterFor demand P = a − bQ and constant MC = c, the fastest way to get the monopoly price is:

Correct Answer: B [P = (a + c)/2]

Explanation:

MR = a − 2bQ = c gives Q = (a − c)/2b and P = (a + c)/2.

13.  
Spot My Mistake“A monopolist with P = 90 − Q and MC = ₹ 10 sets P = MC, so Q = 80.” The correct output is:

Correct Answer: D [40 units]

Explanation:

A monopolist uses MR = MC: 90 − 2Q = 10 → Q = 40.

14.  
Fill in the blankCharging each buyer the maximum price he is willing to pay for each unit is ______-degree price discrimination.

Correct Answer: B [first]

Explanation:

First degree = perfect discrimination; no consumer surplus is left.

15.  
In Marshall's market period (very short period), price is determined mainly by:

Correct Answer: C [Demand, because supply is fixed]

Explanation:

Supply curve is vertical; demand decides price.

16.  
A 'natural monopoly' arises when:

Correct Answer: A [Average cost keeps falling over the whole range of market output, so one firm serves it most cheaply]

Explanation:

Large fixed costs (e.g. a water pipeline network) make one supplier cheapest.

➤ Full notes, shortcuts and every answer explained – SSC CGL 2026 Finance & Economics (Tier II Paper III) book (₹149): www.shanmugamiasacademy.in/study-materials/ssc-cgl-finance-economics

📘 SSC CGL 2026 – General Studies – Finance & Economics (Tier II Paper III)
Here you get the answer with a one-line explanation. 1,064 original questions with worked answers · Part A Finance & Accounts and Part B Economics & Governance notes · practice sets + 3 mock tests
Get the book – ₹149 ₹299 →
Score: 0 Answered: 0 / 0