Econs Market Structure Case Study

Question 1

Barriers to entry

Answer 1

1. Natural barriers
   -capital outlay
   -EOS
2. Artificial barriers
   -high marketing and advertising
   -legal barriers

Question 2

Market is determined by

Answer 2

1. BTE
2. Size of firms
3. Nature of product
4. Availability of information

Question 3

Perfect competition

Answer 3

Seen in the graph above, current market equilibrium is at QeP1, where demand intersects supply. This results in all firms charging price P1 for the good. Firms will produce at profit-maximizing level of output Q1, where MR=MC and charge P1. However, at this level of output, average revenue=average cost, where firms only enjoy normal profits

Question 4

Monopoly

Answer 4

draw he graph bro

Question 5

Monopolistic competition

Answer 5

SR: Seen in the graph, the monopolistic competitive firm initially produced at Q1, where MR=MC since it is the profit-maximizing level of output. At this level of output, they enjoyed supernormal profit of (P1-P2)xQ1
LR: However, the absence of BTE and existence of supernormal profit will lead to the entry of new firms, resulting in a fall in AR and MR from AR1 and MR1 to AR2 and MR2 respectively. Leads to firms to produce the good at Q2 - normal profit since AR=MR

Question 6

Criteria for price discrimination

Answer 6

1. Price setting ability
2. Prevent resale of product
3. Able to identify and segment the market

Question 7

Undesirability of Market dominance

Answer 7

1. Allocative inefficiency
2. X-inefficiency/Dynamic inefficiency
3. Inequity

Question 8

desirability of market dominance

Answer 8

1. EOS
2. Avoiding duplication of resources
3. Dynamic efficiency

Question 9

iEOS

Answer 9

1. Technical
2. Administrative
3. Marketing
4. Financial

Question 10

eEOS

Answer 10

1. development of industrial amenities
2. development of better transport system
3. development of research facilities

Question 11

iDisEOS

Answer 11

1. problems of bureaucratic structure
2. absence of motivational elements

Question 12

eDisEOS

Answer 12

1. factor prices
2. crime rates
3. Infrastructural bottleneck