Th3.4: Prices Wars Flashcards

1
Q

These occur in markets where…

A

non-price competition is weak - where goods have weak brands and consumers are price conscious. also occur when it is difficult to collude

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2
Q

What will a price war do?

A

drive prices down to levels where firms are frequently making losses

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3
Q

What will a price war do?

A

drive prices down to levels where firms are frequently making losses

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4
Q

Firms will continue to produce in the short run, if…

A

if their AVC is below AR

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5
Q

What will firms do in the long run?

A

leave the market and prices will have to rise since supply falls

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6
Q

What do price wars do to profits?

A

lower industry profits

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7
Q

What is one example of an industry using heavy price wars?

A

supermarkets - desperately trying to offer lower prices than their rivals

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