Market structures (Micro) Flashcards
What are the different market structures, What are the objectives of firms and what issues could arise from such objectives.
Define market structures?
The number and size of firms within a market for a good/service.
What are the three general types of market structures?
Perfect competition, imperfect competition, pure monopoly (A spectrum).
What are firms main objectives?
Profit maximisation
Why would firms want to profit maximise?
To reinvest funds for new products, or to pay higher shareholder dividends, encouraging more people to buy shares.
Where is the profit maximising point?
MC=MR (cost of the last unit of output Is equal to the additional revenue)
What are some other firm objectives?
Sales maximisation
Growth
Survival
Maximising market share
Stakeholder objectives (improving working conditions)
Why might a firm want to sales maximise?
Some directors might get their bonus dependent on sales
Why would a firm want to improve stakeholder objectives?
Popularity, more people want to work there
What could be an issue with a firms objectives?
Divorce of ownership from control
What is Divorce of ownership from control?
When a director wants to improve say working conditions or sales whilst the shareholders (profit driven) simply want to maximise profits.
What is the result of Divorce of ownership of control?
Satisficing
What is satisfysing?
‘making do’ with sub optimal profits
