Competitive Market 2 Flashcards
Define a monopoly
Describes a market there is a single supplier and therefore no competition
Monopolies barely exist even Microsoft does not have 100% share
How much Market share should a monopoly business have?
Market share of 25% and above
Why are monopolies bad for consumers?
- restrict choice and tend to drive prices upwards
Why are governments against monopolies?
Exploit consumers by abusing their dominant market position
What are oligopolies?
Markets dominated by a few large companies
The rivalry that exist within oligopoly market can be very intense how does that affect businesses?
The actions taken by one business can affect the profit made by the other business that compete within the same market
What Do businesses in oligopoly markets tend to do?
They tend to focus on non price competition such as branding product design and technological innovation when designing the marketing mix
Why are businesses in oligopoly markets reluctant to compete by cutting price?
Fear that other businesses in the industry will respond by cutting their prices to creating a costly price in which no business wins
What Is a fiercely competitive market?
To be made up of 100 of relatively small firms who compete against each other
Why in Fiercely competitive market competition is increased?
Businesses sell near identical products called commodities which are products such as flour sugar or petrol which are hard to differentiate
Why do businesses in fiercely competitive markets have to manage their production costs very carefully?
- businesses cannot cut it costs as it will not be able to cut its prices without cutting into profit margins
- without Price cuts market share is likely to be lost
How Do businesses in fiercely competitive market survive?
Businesses must find new Innovations regularly because points of differentiation are quickly copied
