AS2 TP1

Question 1

what is monopolistic competition

Answer 1

large number of small firms offering similar but differentiated products
few or no barriers to entry, some degree of power of selling price but limited

Question 2

benefits of monopolistic competition

Answer 2

competition keeps business efficient and strong
firm may gain large market share
can motivate firms management team

Question 3

drawbacks of a monopolistic competition

Answer 3

may result in reduced quality
may result in lower sales/profit
spend more R and D

Question 4

what is an oligopoly

Answer 4

competition among the few 4 firms with more than 60% market share
barriers to entry, price wars

Question 5

what is a monopoly

Answer 5

single seller of a good or service with no close substitutes e.g translink

Question 6

advantages of a monopoly market structure?

Answer 6

can take advantage of EOS in order to keep prices down

have a dominant position in market so doesn’t spend much on promotion

attention can be focused on serving customers rather than beating competitors

Question 7

disadvantages of monopoly market structure

Answer 7

consumers frustrated by constant updates

less urgency to innovate products as no competition

have ability to exploit customers as they have limited other options