Micro: Competitive And Concentrated Markets

Question 1

How can industries be different

Answer 1

Industries can be different on a number of different variables. Some of these are:
Number of sellers
Ease of entry
Type of products that are sold

Question 2

What key questions define market structure

Answer 2

A market structure is defined by a number of key questions
What is the relative market power of firms?
How similar is each firm’s product?
How difficult is it for new firms to enter?
What do firms compete with each other on?

Question 3

What are the types of market structure

Answer 3

Monopoly
Monopolistic competition
Oligopoly
Perfect competition

Question 4

According to traditional theory what is the main objective of firms in an industry

Answer 4

According to traditional theory, maximising profit is the main objective of firms in an industry

Question 5

What is an example of a business that doesn’t profit maximize

Answer 5

Amazon has made very little profit in the last 10 years and seems to have aimed to maximise market share in the short run

Question 6

Draw a profit maximisation graph

Answer 6

Seneca 5.1.2

Question 7

When do firms maximise profits

Answer 7

Firms maximise profit when the marginal revenue (MR) is equal to the marginal cost (MC)

Question 8

What do extra units past the point where MR=MC

Answer 8

Any extra units from here will have a negative impact on revenue

Question 9

Why do extra units past the point where MC=MR have a negative impact on revenue

Answer 9

This is because of diminishing returns