Market structure

Question 1

Types of markets ?

Answer 1

International
national
local
regional

Question 2

Example of international market ?

Answer 2

Oil market

Question 3

Exmaple of national market ?

Answer 3

ITV vs BBC

Question 4

Example of regional market ?

Answer 4

Mace vs Spar

Question 5

Example of local market ?

Answer 5

Taxi firms

Question 6

Types of market structures ?

Answer 6

1. Perfect competition
2. Imperfect competition
3. Oligopoly
4. Monopoly

Question 7

What is a perfect competition market ?

Answer 7

This is a highly competitive market
intense level of price competition
all firms have to use the same prices
large number of independent profit maximisation firms
firms and consumers have perfect knowledge of the economic conditions
consumers and each firm is small in relation to the market
factors of production have perfect mobility
price taking firms
freedom of entry

Question 8

What is imperfect competition ?

Answer 8

Large number of firms
relative intensity of price compeition is moderated by slightly differented products
price makers because they sell differentiated prodcuts
freedom of entry
in the long run normal profits will be earned

Question 9

What is oligopoly ?

Answer 9

small number of firms competing against each other
large in relation to market
focuses on non price competition
barriers to entry
High degree of price stability e.g. cinema prices
interdependent
game theory

Question 10

What is a monopoly ?

Answer 10

Only one firm in the market 
no close substitiutes ito the goods sold 
weak competition in price and non price 
price maker 
the one firm is the industry

Question 11

What is market power ?

Answer 11

The capacity of a firm to influence the market price of a good or service

Question 12

What is market concentration ?

Answer 12

The extent to which a market is dominated by a small number of firms

Question 13

What is supernormal profit?

Answer 13

A profit that exceeds the minimum amount a firm must earn to induce it to remain in the industry

Question 14

What type of profit is present in the short run of perfectly competitive firms ?

Answer 14

Supernormal profit

Question 15

What type of profit is present in the long run of perfectly competitive firms ?

Answer 15

Normal profit

Question 16

Sources of market power ?

Answer 16

product availability
product differentiation
absence / scarcity of firm
customer preferences

Question 17

When does profit maximisation occur ?

Answer 17

when marginal cost equals marginal revenue

Question 18

Types of monopoly ?

Answer 18

1. Pure
2. Legal
3. Natural

Question 19

What is a pure monopoly ?

Answer 19

A market structure in which there is a sole supplier of a good or service that has no close substitutes and for whish there are barriers to entry into the industry

Question 20

What is a legal monopoly ?

Answer 20

A legal monopoly arises in the UK when a firm enjoys a market share of 25 percent or more

Question 21

What is a natural monopoly ?

Answer 21

Arises when a single firm is the most efficient structure fir the production of a particular good or service

Question 22

Sources of monopoly ?

Answer 22

Patents
Trade marks
Copyrights
Designs

Question 23

What is a patent ?

Answer 23

Rights in production, sales, use and importing

can last up to 20 years

Question 24

What is a trade mark ?

Answer 24

Distinguishes a company from competitors

Question 25

What is a copyright ?

Answer 25

prevents someone from copying music,books,photos

Question 26

What is a design ?

Answer 26

prevents the copying of a 3 dimensional product

lasts up to 15 years

Question 27

it is difficult for new firms ot enter an oligopoly. What barrieres are there ?

Answer 27

1. The size of incumbent firms - because of the present firms being large in the market e.g. apple, samsung and nokia. Organic growth is key here. E/g Apple iphone
2. the production and sales strategies of incumbent firms -
3. branding - firms are dominant in the market, sometimes the branding is so successful that the branding becomes the product

Question 28

What is a deadweight loss ?

Answer 28

This arises in the case of monopoly when society is denied output it would prefer to see produced and consumed

Question 29

What is price discrimination ?

Answer 29

This is charging customers different prices for the same product. E.g. student discounts

Question 30

What is producer surplus ?

Answer 30

This is the total amount suppliers in a market receive above that necessary to induce them to supply the goods in question

Question 31

What is a cartel ?

Answer 31

A group of firms or producers that agree to act as if they were a single firm or producer e.g. with regard to pricing and output decisions

Question 32

What is game theory ?

Answer 32

A powerful tool that can be used to explore a widr variety of economic and non-economic relationships

Question 33

What is market failure ?

Answer 33

This arises where the market either fails to pricide certain goods or fauks to provide them at their optimal ir most desirable level

Question 34

What is a monopsony ?

Answer 34

This arises where there is a dominant buyer in a market

Question 35

What is nash equilibrium ?

Answer 35

A situation where economic agents optimise their actions, given the choices made by other parties

Question 36

What is dominant strategy ?

Answer 36

A course of actuon that a player in a game follows regardless of the decisions of other players