BS3- competition and market dominance Flashcards
What is competition?
Methods used by businesses to gain more customers and earn higher profits
Outline why competitive markets have low barriers to entry
They will have low barriers to entry and company’s will constantly be lowering prices ect to be competitive the fore it makes it easy to come into.
Identify two other features of a competitive market
Business have very little control in them
No single producer can dictate price
Business in monopolistic competitive markets compete on non-price differences. Identify three examples of non priced differences
Loyalty schemes
Location
Customer service
Distinguish between an oligopoly and a monopoly
An oligopoly exists when a market is dominated by a few large firms, where as a monopoly is a market controlled by one individual business.
Identify three features of an oligopoly
High Barriers to Entry.
Interdependence.
Each Firm Has Little Market Power In Its Own Right.
Identify three features of a monopoly
A single sells all the output in one market
Unique product
Restrictions on entry and exit
Identify two reasons that a business might decide to enter a market
Diversification
Has a diffent selling point
Identify two reasons that a business might decide to exit a market
Monopoly is taking over so little sales
Product is at the end of it’s life cycle
Outline why economies of scale may act as a barrier to entry
new firms, with relatively low output, will find it difficult to compete because theirs average costs will be higher than the incumbent firms benefiting from economies of scale. The prospect of higher average costs may deter entry.
State two other barriers to entry
No start up funds
May not be able to get the correct licences or permits
