External Influences-markets

Question 1

Define competition

Answer 1

Rivalry amongst sellers

Question 2

Define a market

Answer 2

Any situation where buyers and sellers are in contact in order to establish a price

Question 3

Why have non physical markets grown rapidly?

Answer 3

They’re more convenient

Question 4

Why do physical markets continue to exist?

Answer 4

Due to personalisation offered

Question 5

How are non physical markets classified?

Answer 5

Online or digital

Question 6

Define a competitive market

Answer 6

A market where there are a large number of sellers and they complete mainly upon price

Question 7

Define a monopoly market

Answer 7

A market dominated by one seller(in theory)

Question 8

What are prices usually like in a competitive market?

Answer 8

Low

Question 9

What are prices usually like in a monopoly market?

Answer 9

High(but not always)

Question 10

Give an example of a competitive market

Answer 10

Dairy farming

Currency exchange

Question 11

Give an example of a monopoly market

Answer 11

Tesco

Question 12

Define economies of scale

Answer 12

They arise when unit costs fall as output rises

Question 13

What are unit costs also known as?

Answer 13

The average cost per unit produced

Question 14

How is unit costs calculated?

Answer 14

Total costs in a period(production) divided by Total output in a period

Question 15

Why does unit costs fall as output increases?

Answer 15

Because of the fixed costs

Question 16

As a result of unit costs decreasing what could the business choose to do?

Answer 16

Decrease the price of products

Question 17

What % of a market should a monopoly have according to the CMA?

Answer 17

25%

Question 18

What are 3 characteristics of a monopoly market?

Answer 18

Absence of competition
High prices
Inferior products

Question 19

How can a monopoly be created?

What’s a consequence of this?

Answer 19

Through a merger

Reduces competition

Question 20

Define an oligopoly

Answer 20

Where a market is dominated by a few firms

Question 21

What sometimes occurs in an oligopoly?

Give an example

Answer 21

Collusion

Eg. Keeping prices higher to possibly force other firms out of the market

Question 22

Define monopolistic competition

Answer 22

A market with many competing firms each of whom supplies a slightly differentiated product

Question 23

What are prices like in monopolistic competition?

Answer 23

Competitive prices that are similar but on the low side

Mainly compete on non price differences

Question 24

What are prices like in an oligopoly?

Answer 24

Competitive prices(for the customer)but on the high side

Question 25

Give an example of a monopolistic competition market

Answer 25

Taxi service | Cafes

Question 26

Give an example of an oligopoly market

Answer 26

Car manufacturers Banking Music

Question 27

What are non prices differences?

Answer 27

Methods the business puts in place other than price to attract customers

Question 28

Define market size

Answer 28

The collective value of the good/devices that buyers purchase

Question 29

Define market growth

Answer 29

The % change in the size of the market measured over a specific period

Question 30

Define market share

Answer 30

The % of total sales (by value) that a business has in a specified market

Question 31

Define market power

Answer 31

The ability of a firm to influence or control the terms and conditions on which goods are bought and sold

Question 32

Define market dominance

Answer 32

A measure of market share compared to competitors

Question 33

Define barriers to entry

Answer 33

The factors that could prevent a from from entering and competing in a market

Question 34

Give 5 examples of barriers to entry

Answer 34

Large start up costs Having the marketing budget to break customer loyalty The inability to gain economies of scale The possibility that existing businesses will start a price war Legal restrictions such as patents

Question 35

Which market types have low barriers to entry?

Answer 35

Pure competition | Monopolistic competition

Question 36

Which market types have high barriers to entry?

Answer 36

Oligopoly | Pure monopoly

Question 37

Define barriers to exit

Answer 37

The factors that could prevent a firm from leaving a market, even if it wanted to

Question 38

Give 4 examples of barriers to exit

Answer 38

Difficulty selling off capital High redundancy costs Contracts with suppliers-could face legal challenges if they aren’t honoured Leases with landlords

Question 39

Define a merger

Answer 39

Where two or more companies join together to form a new larger business

Question 40

Define a takeover/acquisition

Answer 40

Where control of another company is achieved by buying a majority of its shares

Question 41

Give examples of some benefits of external growth

Answer 41

May gain new management with new skills Increased market share, power and dominance May be able to meet customer needs more effectively May experience economies of scale

Question 42

Give examples of some negatives of external growth

Answer 42

May suffer from diseconomies of scale due to size May take on extra debts Redundancies Higher prices for customers May result in a dominant business dictating terms and conditions-suppliers

Question 43

Define organic/internal growth

Answer 43

Expansion from within a business

Question 44

Give some examples of organic growth in a business

Answer 44

``` Opening new stores Launching new products Employing more workers Increasing production capacity Investing in new technology Launching existing products into new markets ```

Question 45

What are some advantages and disadvantages of organic growth?

Answer 45

``` Less risky Can be financed by retained profits Sensible/steady way of growth ... Slow growth rate Difficult if market is shrinking Hard to increase market share if already market leader ```