Concentrated and Competitive Markets Flashcards
What is the spectrum of market competition?
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What are the special features of perfectly competitive market?
There are many sellers and buyers none big enough to influence the marketHomogenous product not differentiatedEasy entrance and exit to the marketAll buyers and sellers have perfect informationFirms are price takers they don’t control market prices
What are the three things consumers always want?
Lower prices, better quality and more choices
What happens in a competitive market that benefits consumers?
Profits are driven down, quality is driven up and the prices are driven down.
What are the three efficiencies?
Productive efficiency - producing at the lowest cost per unit possible to stay competitiveAllocative efficiency - allocation of resources effectively to meet the demand of the marketDynamic efficiency - good efficiency in the short term but also the capability of being efficient in the long run through R&D
What is a monopoly?
Monopoly is when there is a single seller in the market.
What is the government’s definition of monopoly?
Governments definition of monopoly is more than 25% share of the market.
How does monopoly power come to be?
It can come through successful internal growth or from the merging of two big companies.
What is the concentration ratio?
It is a measure of the total output produced in an industry by given number of firms.
What are the common concentration ratios?
The most common concentration ratios or C4 and C8 (The combined output of the top four or top eight firms in an industry)
Which markets to the government tend to take an interest in?
Markets with a high concentration ratios because these are the markets with the potential to develop market powers. The government are trying to look after the good of the consumer.
What do you monopolist do to maximise profit?
They construct their supply to the market lack of substitutes means the good is inelastic large increase in price exceeds losses to less sales - inc. profits/revenues for the producer & lower costs of production
What is the key difference between a graph for a monopolistic market and a competitive market?
The graph for monopolistic market shows the producer surplus as far bigger than the consumer surplus and there is deadweight loss this is not the case for the competitive market graph.
What are monopolies and example of and why?
Monopolies are an example of market failure because they failed to allocate resources effectively.
What is the CC do to improve or maintain competition?
The block or modify mergers.They may also force the dominant firm to sell off some of his assets if it has too much of a monopoly in an area.
