3.8 Market Structure

Question 1

What are 3 pricing strategies?

Answer 1

• Price skimming
• Penetration pricing
• Cost Plus Pricing

Question 2

Define price skimming

Answer 2

When a new and unique product enters the market, its producers charge a very high price for it initially as consumers will be willing to pay more for the new product

Question 3

Define penetration pricing

Answer 3

when producers set a very low price which encourages consumers to try the product, helping expand sales and increase loyalty

Question 4

Define Cost Plus Pricing

Answer 4

this involves calculating the average cost of producing each unit of output and then adding a mark-up value for profit.

Question 5

List 3 advantages of perfect competition

Answer 5

High consumer sovereignty
Low PRices
Efficiency

Question 6

List 2 disadvantages of perfect competition

Answer 6

Wasteful compeition
Mislead custoemrs

Question 7

Define monopolies

Answer 7

Dominant firms who have market power to restrict competition in the market

Question 8

What are 3 disadvanatges of monopolies?

Answer 8

not respond quickly to customer demands

Lower Quality

Inefficiency