Spectrum Of Com Flashcards
Characteristics of a monopoly
Profit maximisers
High barriers to entry
Price maker
Price discrimination
How would you know if a firm has monopoly power?
If it has 25% market share.
How much market share does Google have and what does it dominate ?
90% market share and dominates the search engine market
How can monopoly power be gained
If there is multiple suppliers
What is an oligopoly market in the Uk?
Supermarket
What 9 factors influence a monopoly?
Barriers to entry
Limit pricing
Owning a resource
Sunk costs
Brand loyalty
Set up costs
The number of competitors
Advertising
The degree of product differentiation
Explain how economies of scale influence a monopoly
- firm grows larger average cost of production
- new entrants don’t have cost advantage
-stops them from, entering
How does barriers to entry influence a monopoly?
Higher the barriers to entry means they can maintain monopoly power
How does limit pricing influence a monopoly?
This means existing firms set their prices lower than the production costs of new entrants
New firms can’t enter profitability
How does owning a resource influence a monopoly?Give examples
Gaining control of a resource
BT owns network of cables
Different for new firms to enter the market
How does sunk costs influence monopolies?
Unrecoverable costs if high in industry
New firms would be deterred to enter the market
Because they won’t get the value of their costs back
How does brand loyalty influence monopolies?
If Consumers are very local to brand e.g through ads
Difficult for new firms to gain market share
How does set up costs influence monopolies?
If it’s expensive to establish firm then new firms will unlikely to enter the market.
How does the number of competitors influence monopolies?
Fewer competitors
Means Lower barriers to entry
Its harder to gain market share
How does advertising influence monopolies?
Advertising can increase consumer loyalty making demand price in elastic and creating a barriers to entry.
How does the degree of product differentiation influence monopolies?
More the product is differentiated through quality, pricing and branding
It’s easier to gain market share
Because productions seems unique and he’s few competitors
Give the 4 factors of an oligopoly
High barriers to entry and exit
High concentration ratio
Interdependence of firms
Product differentiation
How do high barriers to entry and exit influence monopolies?
High barriers make market less competitive
How does high concentration ratio influence oligopolies
Few firms supply the majority of the market
High concentration ratio makes market less competitive.
How does interdependence of firms influence an oligopoly?
One action of own firm affect another firms behaviour
How does product differentiation influence oligopolies?
Firms differentiate their products using branding. The degree of product differentiation can change how far the market is an oligopoly.
What type of competition does a monopolistic ally competitive market have?
Imperfect competition
Are firms short run or long run profit maximisers ? (Monopolistically competitive market)
Short run profit maximisers
How do firms in a monopolistically competitive market compete?
Through non price competition
