Market Stuctures

Question 1

Perfect compe

Answer 1

Many buyers many sellers
Perfect knowledge 
Price takers 
No barriers
Profit max

Question 2

Monopoly

Answer 2

Single supplier that constitutes the entire industry

Barriers: Eos(natural mono), patent, high FC, predatory pricing

LR abnormal or normal profit

Question 3

Collusion

Answer 3

Secret corporation to limit competition and gain advantage by agreeing on a mutually beneficial pricing strategy

Question 4

Oligopoly

Answer 4

A few firms dominate the market

Question 5

Price discrimination

Answer 5

Same products at diff price with reasons not associated w costs

Question 6

What’s CMA’s criteria for monopoly?

Answer 6

Over 25%

Question 7

What’s considered as high concentration ratio?

Answer 7

5-firm 60%

Question 8

Natural monopoly

Answer 8

Eos is So large that new entrants find it impossible to match the cost and prices of the established firm

Question 9

limit pricing

Answer 9

Set p low enough to deter new entrants (Lower than min LRAC so they can’t make profits)
P set below SR profit max point yet incumbent can still make profits

Question 10

Price cap

Answer 10

RPI-X

X=efficiency savings

Question 11

Windfall tax

Answer 11

One off rétrospective tax on monopoly profits

Question 12

Contestable market

Answer 12

An industry where there are no significant barriers to entry or exit (no sunk cost

Question 13

Predatory pricing

Answer 13

A SR strategy where a firm undercuts rivals on price to below cost
In LR small firms exit and large firms can raise p again

Question 14

What is the diff bet limit and predatory pricing

Answer 14

Limit pricing is when new entrants haven’t entered yet
Limit pricing incumbents Can make profits
Predatory selling below AVC/ATC

Question 15

Compétitive tendering (AN of gov intervention of making more competitive

Answer 15

Allow private firms to bid for gov contracts

Question 16

Privatisation

Answer 16

Transfer from state ownership to private sector ownership

Question 17

CMA

Answer 17

Competition and markets authority

Question 18

What’s monopolistic competitions resemblance to perfect compe?

Answer 18

Many buyers and sellers
can’t affect market too much- taker
No barriers

Question 19

What’s mono Competition’s resemblance to monopoly?

Answer 19

Monopoly over own brand => downward sloping AR

Question 20

Regulatory capture

Answer 20

An org set up to protect the interest of the public instead defends the industry that it was set up to regulate against
E.g. Present sélective mkt research

Question 21

Name some barriers to entry

Answer 21

Patents 
Ad
Predatory 
Eos
Fixed cost

Question 22

Monopsony

Answer 22

Single buyer
Can exploit bargaining power with a supplier to negotiate Lower p
Reduce cost and increase profit margins

Question 23

Characters of monopsony

Answer 23

Single buyer w/ p making pwr
Small, compe sellers; price takers: low level of mkt pwr; cannot to sell to other buyers
Bte for buyers

Question 24

When do firms have mkt power?

Answer 24

Have significant share of market

Eg Monopoly has 25%, merger increases mkt share, cartel acts as monopoly

Question 25

Forms of abuse of mkt power

Answer 25

Set higher P Offer less choice Restrict compe e.g. Vertical integration ensures the bar only sells beer from a certain brewery Inefficient allocation of resources (x ineff

Question 26

Eva for monopsony

Answer 26

Fair trade Regulate Benefit consumers Benefit buyers

Question 27

Tacit collusion

Answer 27

Informal agreements without speaking to rivals | Hard to prove

Question 28

Overt/formal collusion

Answer 28

Spoken, open or traceable Cooperation to set high p by restricting output (producing at MC=MR rather than AC=AR if contestable) Cartel is one form

Question 29

Market power

Answer 29

Ability to manipulate the price of an item by manipulating S(control Over suppliers/D(own flight route Control profit margin Restrict entrants- increase own demand Become monopoly- set higher p w/o losing high % of sales

Question 30

Price leadership

Answer 30

Following p set by a mkt leader. Keep p high without meeting rivals Hard to prove: maybe just natural costs

Question 31

Labour supply

Answer 31

Quantity of lab measured in lab hrs that ppl r willing to S over a period of time

Question 32

Labour Supply include those who are…

Answer 32

Eco active: actively seeking work or in work | Productive capacity increase ifSL increases

Question 33

Participation ratio(active ratio

Answer 33

SL/population of working age

Question 34

Sunk cost

Answer 34

Firm x recover if it were still to exit

Question 35

Characters of contestable mkts

Answer 35

No sunk cost Freedom Perfect knowledge: same tech and can use at same cost

Question 36

Role of compe authority

Answer 36

Promote compe Fine as a deterrent Protect cons Act as a surrogate for compe

Question 37

N firm concentration ratios

Answer 37

Sum of mkt share of n largest firms

Question 38

Reasons for compe authority to act

Answer 38

``` Reduce monopoly power Increase contestability Increase choice Lower p OR when there is natural monopoly… D inefficiency ```

Question 39

Patent

Answer 39

A legal protection of a design idea/process or a kind of copyright

Question 40

Cartel

Answer 40

Group of producers acting together restricting supply to force up price Act like a monopoly

Question 41

Conditions For cartels to succeed

Answer 41

Major producers are members No sub Supply controlled - without cheating High bte

Question 42

Regulatory capture

Answer 42

Firm and regulatory body become too well acquainted that the regulations become more lenient.