3.14.1 Market Structures

Question 1

in econ industries and sectors are seperated into different types of ** based on *`?

Answer 1

market structures

the level of competition

Question 2

What are the 4 key questions/points when determining the level of competition

Answer 2

the number of firms operating in the market

barriers to entry

how similar products and services produced by firms in the market are

how much control the firms have over the prices charged for their goods and services

Question 3

Explain ‘how many firms operate in the maket ‘ influences competition

Answer 3

if there’s lots of similarly sized firms

likely have low market power

so

can’t control/influence the behaviour of other firms

Question 4

Explain ‘how barriers to entry ‘ influences competition

Answer 4

easy for new firms = increases competition as existing firms know that if not efficient and innovative new rivals will appear

Question 5

Example of a barrier to entry ?

Answer 5

high economies of scale as larger companies have the cost advantages making it hard for small companies to compete with either their profit margins or low selling prices they would have sold onto the customer

less competitive

Question 6

Explain ‘how barriers to EXIT ‘ influences competition

Answer 6

hard to exit - firms won’t enter in the first place

Question 7

Example of a barrier to exit ?

Answer 7

high investment in specialist equipment (sunken costs?)

Question 8

Explain ‘how similarity of products/services’ influences competition

Answer 8

if products all very similar the customer will switch to the cheapest

but firms can distinguish their product through quality, branding and marketing

Question 9

examples of similar products /sectors

Answer 9

agricultural products

raw materials

Question 10

homogeneous meaning

Answer 10

identical

Question 11

Explain ‘control firm have over prices that they charge’

Answer 11

In certain markets (esp those with loads of firms/homogeneous products) firms have no control over the SP for their g/s

they must accept the market rate

Question 12

Define price taker

Answer 12

firm which has no control over the price of their p/s, they must accept the market rate

Question 13

Define Price Maker

Answer 13

firm that has the power to set a price within a market

Question 14

State the number of firms in a :

• Perfect Competiton
• Monopolistic Competition
• Oligopoly
• Monopoly

Answer 14

PC: infinte
MC: many
O: few
M: one