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Indian EconomyMediumAsked in: CDS · CDS-II 2021, GK

Which one of the following is a typical example of monopolistic competition ?

  1. A.Retail vegetable markets
  2. B.Market for soaps
  3. C.Indian Railways
  4. D.Labour market for software engineers

Correct answer

B. Market for soaps

Explanation

The correct answer is B, Market for soaps. Soap is sold by many firms under different brands that buyers see as close but not perfect substitutes, which is the mark of monopolistic competition.

Edward Chamberlin described this market form in 1933. Its features are a large number of sellers, product differentiation through brand, quality, packaging or scent, free entry and exit, and heavy spending on advertising. Each firm has a little control over its own price because of brand loyalty, so it faces a downward sloping demand curve, yet competition from close substitutes keeps profits normal in the long run. Toothpaste, shampoo, restaurants and clothing brands are other common examples.

A is wrong because vegetables sold by many vendors are nearly identical, which is close to perfect competition. C is wrong because Indian Railways is a single state-owned supplier of rail transport, an example of monopoly. D is wrong because the market for software engineers is a factor (labour) market in which wages are set largely by demand and supply of skills, not a product market with branded goods.

Exam tip: perfect competition = identical products; monopolistic competition = differentiated brands (soap, toothpaste); monopoly = single seller.

Practice Questions

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Q1.Indian EconomyAsked in: CDS · CDS-II 2022, GKEasy

Which one of the following central features is not associated with Capitalist Economy?

  1. A.There is generalised commodity production - it has market value.
  2. B.Productive wealth is held predominantly in private hands.
  3. C.Economic life is organised according to market principles.
  4. D.Economic organisation is based on planning, a supposedly rational process of resource allocation.
Show answer
Correct answer: D. Economic organisation is based on planning, a supposedly rational process of resource allocation.

Allocation of resources through central planning is the mark of a socialist or command economy, not a capitalist one. In a capitalist economy, the means of production such as land, factories and capital are owned mainly by private individuals and firms.

Q2.Indian EconomyAsked in: NDA · NDA-I 2026, GATHard

Consider the following statements:

I. The Second Five-Year Plan sought to promote development which would establish socialistic pattern of society in India.

II. Between 1966 and 1969, three Annual Plans were formulated.

III. The Ninth Five-Year Plan could not take off at its stipulated time in the 60th year of India's Independence.

Which of the statements given above are correct?

  1. A.I and II only
  2. B.I and III only
  3. C.II and III only
  4. D.I, II and III
Show answer
Correct answer: A. I and II only

Statements I and II are true, but the Ninth Plan began in 1997, the fiftieth year of Independence, not the sixtieth.

Q3.Indian EconomyAsked in: CDS · CDS-I 2023, GKHard

According to the National Multi-dimensional Poverty Index (MPI) constructed by the NITI Aayog, a household is considered deprived if 1. a single member of the household is identified as under-nourished 2. the body mass index of a woman member, between 15 years and 49 years of age, is below 18.5 kg/m2 Select the correct answer using the code given below.

  1. A.1 only
  2. B.2 only
  3. C.Both 1 and 2
  4. D.Neither 1 nor 2
Show answer
Correct answer: C. Both 1 and 2

Under the nutrition indicator, a household is deprived if any one eligible member is undernourished, and a woman of 15 to 49 with a BMI below 18.5 counts as undernourished.