What is a market called when a few firms dominate the industry?
Correct answer D. Oligopoly
Topic / 23 questions
Oligopoly MCQs
Oligopoly MCQs cover market structures in which a few large firms dominate and each firm's decisions affect its rivals. They help economics students and candidates for CSS, PMS, UGC NET and BCS. Every question has an instant answer, so you can check your understanding of cartels, the kinked demand curve and strategic pricing.
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What does the kinked demand curve theory assume?
Correct answer C. An increase in price by the firm is not followed by others
What does game theory assume about firms’ behaviour?
Correct answer A. Firms consider the actions of others before deciding what to do
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What are firms in an oligopoly likely to try to do?
Correct answer D. Try to be a price maker
Which statement about cartels is true?
Correct answer C. There may be an incentive to cheat
The hand tools market, covering items such as hammers and screwdrivers, is dominated by Draper, Stanley and Craftsman. How is this market best described?
Correct answer C. An oligopoly
If oligopolists collude and successfully form a cartel, what is the market outcome?
Correct answer A. The same as if it were served by a monopoly
As the number of sellers in an oligopoly increases, what does the market increasingly resemble?
Correct answer B. A competitive market
When an oligopolist sets its output on its own to maximise profit, how does its price compare with monopoly and competitive prices?
Correct answer B. Less than the price charged by a monopoly and more than the price charged by a competitive market
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What is it called when interacting oligopolists each pick their best strategy, given the strategies chosen by all the others?
Correct answer B. Nash equilibrium
Why is collusion hard for an oligopoly to sustain?
Correct answer D. All of these answers
ABC Publishing sells an economics textbook and a study guide, both with zero marginal cost. Raheel values the text at Rs75 and the guide at Rs15; Mariam values the text at Rs60 and the guide at Rs25. If ABC ties (bundles) the two products, what combined price should it charge?
Correct answer D. Rs 85
What are laws that make it illegal for firms to conspire to raise prices or cut production commonly known as?
Correct answer D. Antitrust laws
In a cartel, each member firm may be assigned a fixed amount of output. What is this allocation called?
Correct answer B. Quota
What does the kinked demand curve theory assume about firms?
Correct answer D. Firms are competitive
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According to the kinked demand curve theory, what is likely to happen?
Correct answer B. Non-price competition is likely
What do firms in a cartel do?
Correct answer B. Firms collude
What is a market structure called in which many firms sell products that are similar but not identical?
Correct answer C. Monopolistic competition
An oligopolist is maximising its own profit. If, on the marginal unit, the output effect is greater than the price effect, what should it do?
Correct answer B. Produce more units
When an oligopolist chooses its output on its own to maximise its profit, how does that output compare with monopoly and competitive levels?
Correct answer C. More than the level produced by a monopoly and less than the level produced by a competitive market
About Oligopoly MCQs
This Microeconomics topic studies markets with a small number of interdependent sellers. Questions cover how firms in oligopoly behave, why cartels try to act like a single monopoly and why they tend to break down, and the kinked demand curve theory, which explains why prices in oligopoly can stay stable even when costs change. Some items compare oligopoly with monopolistic competition, where many firms sell similar but not identical products, and one calculation tests bundling, where two goods are sold together to capture more consumer willingness to pay. Graph interpretation and definitions dominate exam questions here.
Exams that include Oligopoly MCQs
Pakistan
- CSS
- PMS
- FPSC
- PPSC
- Lecturer tests
- Banking job tests
India
- UPSC CSE
- UGC NET
- IBPS PO
- SBI PO
Bangladesh
- BCS
- Bangladesh Bank recruitment
- Bank job exams
Frequently asked questions
What does the kinked demand curve explain?
The kinked demand curve model explains price rigidity in oligopoly. A firm expects rivals to match a price cut but not a price rise, so demand is elastic above the current price and inelastic below it. This creates a gap in marginal revenue, so prices stay stable.
Why do cartels often break down?
Each cartel member has an incentive to cheat by producing more than its agreed quota and selling at the high cartel price. When several members cheat, output rises, the price falls and the agreement collapses. Cartels are also illegal in many countries under competition law.
How many Oligopoly MCQs are on MCQs360?
MCQs360 has 23 Oligopoly MCQs, each with an instant answer, free and with no sign-up. Sketch the kinked demand curve once before you start, as several questions are easier to answer when you can picture the diagram.
Last reviewed October 2026