Markets 1.2.3

Question 1

What is a market?

Answer 1

A place where buyers and sellers can meet to facilitate the exchange or transaction of goods and services.

Question 2

What are determinants of market structure?

Answer 2

• Number of buyers and sellers.
• Economies of scale
• Nature of product
• Entry barriers
• Mobility of goods
• Factors of production
• Government intervention

Question 3

What are the factors of production?

Answer 3

Land
Labour
Capital
Entreprenourship

Question 4

What is a monopoly?

Answer 4

When one company and its product dominate an entire industry whereby there is little to no competition and consumers must purchase that specific good or service from the one company.

Question 5

What are advantages of monopolies?

Answer 5

• They can charge higher prices and make more profit than in a competitive market.
• Stability of prices. In the absence of competition, there are no price wars that might rattle markets.
• The ability to scale up.
• Monopolies can lead to large economies of scale.
• Budgets for research and development.

Question 6

What are disadvantages of monopolies?

Answer 6

• Poor levels of service
• No customer sovereignty
• Consumers may be charged high prices for lower quality goods and services
• Lack of competition may lead to low quality and out of date goods and services.

Question 7

What is a duopolopy?

Answer 7

Where two competing businesses control the majority of the market sector for a particular product or service. e.g Coke, Pepsi.

Question 8

What are advantages of duopolies?

Answer 8

It gives all the opportunities for two companies to collaborate to receive the highest profits.

Question 9

What are disadvantages of duopolies?

Answer 9

• Consumers have little choice in products
• Two players may collide and increase prices.

Question 10

What is an oligopoly?

Answer 10

Dominated by a few firms, resulting in limiting competition. They can collaborate with or against each other. Entering an oligopoly is difficult and theres normally around 3-5 firms dominating in these sectors.

Question 11

What are the advantages of oligopolies?

Answer 11

• Low level of competition.
• Better customer support.
• Price stability within the market.
• Can receive big profits.

Question 12

What are disadvantages of oligopolies?

Answer 12

• Limited customer choice.
• High barriers to entry.
• Companies are not interested in innovations since the level of competition is low.

Question 13

What is economies of scale?

Answer 13

Cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs.

Question 14

What is nature of a product?

Answer 14

Involves converting inputs into outputs.

Question 15

What are entry barriers?

Answer 15

Describes factors that can prevent or impede new comes into a market or industry sector.

Question 16

What are mobility of goods?

Answer 16

Helping organisations move equipment and goods.

Question 17

What are factors of production?

Answer 17

Resources people use to produce goods.

Question 18

What is monopolistic competition?

Answer 18

Monopolistic competition characterises an industry in which many firms offer products or services that are similar substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, the decisions of any one firm do not directly affect those of its competitors.

Question 19

What is pure competition business?

Answer 19

A marketing situation in which there are a large number of sellers of a product which cannot be differentiated and, thus, no one firm has a significant influence on price.