Markets Flashcards
1
Q
Market definition
A
where goods and services are bought and sold
2
Q
perfect competition
A
- large number of sellers
- perfect information transfer
- freedom of entry to market
- homogeneous product
- many buyers
- no government interference
- perfect mobility
3
Q
market price in perfect completion
A
look at notes
price set by marginal firm
p1 = equilibrium price set by the system Q = quantity supplied at equilibrium to the market
4
Q
Monopoly
A
represents the opposite of perfect competition as supply is controlled by 1 firm
for a pure monopoly = one firm only
1/4 of the industry is controlled by 1 firm
few competing firms = oligopoly
2 competing firms = duopoly
5
Q
causes of monopoly
A
- legal protection: patents, nationalised industry
- avoid resource wastage
- supply restriction
- takeovers
6
Q
forms of monopoly
A
- nationalised industry: in the public interest
- cartels: groups acting to fix prices
- theory: selling syndicates market cartel products
- practice: loose price fixing agreement and market share outs
- trade associations
7
Q
characteristics of monopoly
A
monopolist output+ industry output
- monopolist has downward trending demand curve
- firm can fix price and not accept market price
- make supply elastic - allows quantity sold to determine demand
- can fix quantity sold therefore supply inelastic - quantity demanded determines price
- monopoly can only sell more by reducing price
- demand slopes down MR
8
Q
monopoly advantages
A
- wasteful competition reduced
- economies of scale
- research and development easier in a fixed environment
- excess capacity avoided
9
Q
monopoly disadvantages
A
- high prices to maintain abnormal profits
- low quality goods may occur
- not best use of resources
10
Q
imperfect competition summary
A
monopoly = single firm monopolistic = many firms, very competitive, similar to perfect competition with market limitations and information restrictions oligopoly = a few large firms duopoly = 2 firms
11
Q
monopolist competition (MC)
A
characterised by:
- price cutting (computers)
- non price competition
- packing and advertising costs are high
- consumer service is high
