4. Market Structures

Question 1

Tacit collusion

Answer 1

verbal agreement, non formal
break down quick

Question 2

non tacit/overt

Answer 2

for all agree to price fix

Question 3

natural monopoly

Answer 3

economies of scale are so large, not a single producer can fully exploit them and it is more efficient for there to be a monopoly

Question 4

x inefficiency

Answer 4

waste in production process, poor management, leads to costs being above where they should be on the ac curve as there’s a lack of competition

Question 5

first degree price discrimination

Answer 5

each customer charged different price, due to their income

Question 6

second degree price discrimination

Answer 6

prices are different due to the volume purchased

Question 7

third degree price discrimination

Answer 7

different groups of people, different prices, could be students and elderly, or could be train tickets higher price at peak time

Question 8

natural monopoly disadvantages

Answer 8

disadvantages - lack of choice, less regulating if they aren’t approved by the government, exploitation

Question 9

natural monopoly advantages

Answer 9

the economies of scale can be used to lower their costs, no one else is producing in this area so every supplier has to supply them and can get it cheap

Question 10

perfectly conestable market

Answer 10

low loyalty
actual and potential competition
no barriers to entry or sunk costs
perfect information
produce at lowest AC