7- Market Structures Flashcards
1
Q
Types of market structures
A
- Perfect competition
- Monopolistic competition
- Monopoly
- Monopsony
- Oligopoly
2
Q
Characteristics of markets
A
- Number and size of firms
- Barriers to entry and exit
- Level of knowledge/ information
- Product homogeneity
- Price setting power
- Scope for economies of scale
- Level of profit
3
Q
Possible barriers to entry
A
- Capital costs
- Sunk costs
- Economies of scale
- Natural cost advantages- some produces have advantages because they own superior factors
- Legal barriers
- Marketing barriers- creating a strong brand image
- Limit pricing
- Anti-competitive practices
4
Q
Examples of legal barriers
A
- Patent laws can prevent competitor firms from making a product for a given number of years after its invention
- The government may give a firm exclusive rights to production e.g. broadcasting rights to commercial TV companies
- May make nationalised industries into monopolies by forbidding private firms to set up in the industry.
5
Q
Examples of marketing barriers
A
- When existing firms spend lots of advertising so consumers associate a product with a brand e.g. the hoover company and the vacuum cleaner.
6
Q
Examples of anti-competitive practices
A
- A manufacturer may refuse to sell goods to a retailer which stocks the products of a competitor firm.
- A manufacturer may refuse to sell a good, when it has a monopoly in production, unless the buyer purchases their whole range of goods.
- Firms may be prepared to lower prices for long enough to drive out new entrants to the business.
7
Q
Innocent entry barriers
A
Inevitable barriers to entry e.g. cost advantages
8
Q
Deliberate entry barriers
A
Marketing barriers, limit pricing, anti-competitive practices
9
Q
Barriers to exit
A
- Cost and time of redundancy
- Selling premise and stock
- Notifying customers and suppliers
- Employment laws
- Contracts
10
Q
Examples of industries with product homogenity?
A
- Coal
- Steel
- Potatoes
11
Q
Knowledge in markets?
A
- Prices
- Output
- Products
12
Q
Price maker
A
A firm that has to cut its price in order to sell more.
13
Q
Price taker
A
A firm that has to offer its product at the same price as everyone else in the market.
