Y1 Competitive and concentrated markets

Question 1

Characteristics of a perfectly competitive market

Answer 1

Homogeneous products
Many suppliers
No barriers to entry
Perfect info
Firms are price takers not setters
Firms are fully efficient

Question 2

Monopsony

Answer 2

Only one buyer in a market

Question 3

Types of profit

Answer 3

Normal - Only enough to keep the firm alive
Supernormal - More than normal

Question 4

X-efficiency

Answer 4

Latest tech

Question 5

Monopoly power

Answer 5

> 25% market share

Question 6

Pros of monopoly

Answer 6

Lower avg cost
Research and development
International competitiveness
Natural monopolies

Question 7

Cons of monopoly

Answer 7

Higher prices
Less choice
Output lower
May be inferior quality

Question 8

Liberalisation

Answer 8

Lessening of gov regulations and restrictions to increase competition

Question 9

When does privatisation fail

Answer 9

When consumers have no choice (water,trains etc) and investment is paid by higher bills. So firms can’t make much profit.

Question 10

What happened to the UK energy market

Answer 10

Privatised in 1980s and deregulated. Now dominated by: British Gas, EDF, EON, npower, SSE and Scottish power. Their monopoly power means they can charge high prices.