Firms and decisions

Question 1

Distinguish characteristics of each market structure

Answer 1

1. Barriers of entry
2. No. and size of firms
3. Nature of product
4. Perfect information

Question 2

What separates the short run and long run?

Answer 2

Not based on time frame but rather on whether if a firm is tied down by at least one factor inputs.

Question 3

what does it mean to have inefficeint allocation of resources?

Answer 3

allocative inefficiency -> market failure where social welfare is not maximised -> over/underproduction/conusmption of goods

Question 4

what is price discrimination?

Answer 4

charging difference prices in different markets for the same good or service for reasons not arising from cost difference

Question 5

what is the criteria for price discrimination to be effective?

Answer 5

1. some market power
2. difference in elasticity of demand for different age groups
3. good sold cannot be resold to another market

Question 6

what is the difference between contestability and competition in the market?