large market share impact on consumers

Question 1

KAA 1

Answer 1

K - lower price
An - benefit from economies of scale. Diagram with downward shift of AC/MC
Ap - if market share > 25%

Question 2

eval 1

Answer 2

Depends on objective of firm and whether they pass on falling costs to consumers. May continue to profit maximise …

Question 3

KAA 2

Answer 3

K - increase in prices
An - may use market share to increase barriers to entry. This can allow for prices to be increased due to lack of competition

Question 4

eval 2

Answer 4

Suffer in the short term but increased profit can be used to invest and create more efficient techniques to lower costs and prices in the future