Barriers to entry and miscellaneous Flashcards
Define barrier to entry
any obstacle that prevents a new firm entering a market these are also essentially sources of monopoly power
Four types of B to entry
legal technical strategic and brand loyalty
e.g Lloyds TSB
5 legal barriers to entry
patents, licences/permits to operate, red tape (excessive bureaucracy), standards and regulations, insurance
4 technical B to entry
start up costs, sunk costs of advertising and specialist machinery, economies of scale, natural monopoly
Strategic barriers to entry i
predatory pricing, limit pricing, heavy advertising and patents (these aren’t legal barriers to entry)
- these come from incumbent
define barrier to exit
any obstacle that prevents a firm leaving a market
exmaples of barriers to exit
under valuation of assets, redundancy costs, penalties for leaving contracts early, sunk costs
Allocative efficiency consumer analysis
- resources follow conumers demand
- low prices,
- maximise C surplus
- high choice
- high quality
allocative efficiency producer surplus
- retain increase market, stay ahead of rivals, increase profit
productive efficiency analysis
consumer: lower prices, higher CS, full exploitation of EOS
producer: more production at lower ac, higher profit, lower price and more market share
productive efficiency?
maximising output at the lowest point of the AC curve
dynamic efficiency analysis
what? re investemtn of SNP into innovation, R and D into new tech to lower LRAC (needs SNP in lr)
consumers: new innovative products, lower price over time, high cs
producer cs: LR profit max, lower costs over time, retain and increase MS, ahead of rivals
X efficiency analysis
- production with no waste/inefficiency e.g produce on ac curve
- consumer: lower price and higher cs
- producer: lower costs, higher profit, lower price and increase ms
