1.5 Perfect competition, imperfectly competitive markets and monopoly

Question 1

market structure

Answer 1

the number and size of firms in a market

Question 2

perfect competition

Answer 2

large no. of buyers and sellers, perfect information, homogeneous goods, no barriers to entry and exit, price takers

Question 3

pure monopoly

Answer 3

one firm supply’s the market

Question 4

divorced ownership of control

Answer 4

separation between shareholders and directors of PLC

Question 5

satisficing

Answer 5

making do with a sub optimal profit

Question 6

increasing market share

Answer 6

firm seeks to maximise its % share

Question 7

stakeholder

Answer 7

anyone with interest to a business

Question 8

price taker

Answer 8

firm that is unable to influence price

Question 9

static efficiency

Answer 9

efficiency at a point in time

Question 10

monopolistic competition

Answer 10

large number of firms supplying slightly different products

Question 11

oligopoly

Answer 11

dominated by few powerful firms

Question 12

concentration ratio

Answer 12

measures how concentrated a merket is

Question 13

cartel

Answer 13

collusion between oligopoly firms to fix price between them

Question 14

tacit collusion

Answer 14

collusion with no formal agreement

Question 15

overt collusion

Answer 15

collusion with an open agreement

Question 16

interdependance

Answer 16

how firms in oligopoly are effected by rivals price changes

Question 17

price maker

Answer 17

power to set ruling market price

Question 18

barriers to entry

Answer 18

features that make it difficult or impossible to enter a market

Question 19

monopoly power

Answer 19

the power of a firm to act as a price maker

Question 20

product differentiation

Answer 20

using marketing to make a product seem different to others

Question 21

sunk costs

Answer 21

costs that cannot be easily recovered in a firm has to exit

Question 22

concentrated market

Answer 22

dominated by small no. of firms

Question 23

x-inefficiency

Answer 23

monopolies unwilling to control costs of production

Question 24

natural monopoly

Answer 24

single firm can benefit from continuous economies of scale

Question 25

price discrimination

Answer 25

monopoly power can charge different consumers different prices for the same product

Question 26

consumer surplus

Answer 26

difference between what consumers are willing to pay and what they actually pay

Question 27

producer surplus

Answer 27

difference between what producers are willing to accept and what they receive

Question 28

price competition

Answer 28

reducing price to make product more desirable than competitors

Question 29

price war

Answer 29

firms repeatedly reduce price below competitors to win market share

Question 30

non-price competition

Answer 30

competition on features other than price, like quality or advertising

Question 31

contestable market

Answer 31

freedom of entry and exit

Question 32

hit and run competition

Answer 32

where new entrants take share of super normal profits then exit

Question 33

dynamic efficiency

Answer 33

improvement in productivity over time