8.6 Market Imperfections Flashcards
When does perfect information exist and when doesn’t it exist?
Exists: perfectly competitive market
Doesn’t exist:monopoly or imperfect competition
In an oligopolistic market how can firms get rid of uncertainty?
Collusion
Why is a monopoly a form of market failure?
It restricts output and raises prices (does not benefit the consumer)
-prices too high with too few of society’s scarce resources being allocated to the market in which the monopoly is producing
What is the immobility of labour?
The inability of labour to move from one job to another because of occupational reasons(e.g the need for training) and geographical reasons(cost of moving to another part of the country)
The immobility of the factors of production is an important cause for…
Market failure
When does occupational immobility of labour arise?
When workers lack the skills to move between different types of employment
(Caused by a lack of qualifications)
When does geographical immobility of labour occur?
When geographically barriers between markets prevents labour from moving from one area to another to find employment
What does the causes of labour immobility lead to?
Unemployment and a waste of scarce resources
Why is a cartel worse than a monopoly?
It has the disadvantages but doesn’t have the advantages
What is the issue for firms having a lack of knowledge in an imperfectly competitive market?
Likely to lack accurate information about how their rivals (other firms in the market) may react to their pricing decisions
