3A: the market & competition

Question 1

what is perfect competition ?

Answer 1

competition between a large number of businesses .

• they are independent of each other
• products are homogeneous.
• barriers to entry are low
• low control over the price
• price takers

Question 2

what is monopolistic competition ?

Answer 2

*competition between many small businesses
*very week branding
*barriers to entry are low
*they try to differentiate themselves from rivels
*little control over price
*they are price takers
*e.g. take aways ,

Question 3

what is oligopoly ?

Answer 3

• competition when a few businesses dominate the market

• the action of one firm affects the other businesses e.g. if one company increases its market share others lose their market share

• they exist because there are high barriers to entry e.g. car manufactures , petrol station

• lots of branding
• price makers

Question 4

what are some advantages of oligopolies ?

Answer 4

*large economies of scale
*high profits
*greater variety of products

Question 5

disadvantages of oligopolies

Answer 5

companies may illegally act together to keep prices high

Question 6

define the term monopoly

Answer 6

just one business in the market e.g. water company
* but they cannot rise the prices due to regulations from the government