Market Structures

Question 1

What are the most important features of market structure

Answer 1

• no. of firms
• market share of the largest firms
• production costs
• degree of integration
• extent of product differentiation
• structure of buyers
• turnover of customers

Question 2

Cost factors that influence competitiveness for an industry

Answer 2

• entry costs into a market
• sunk costs / exit costs
• natural cost advantages
• control of the supply chain in a market through vertical integration

Question 3

What are natural cost advantages

Answer 3

Location advantages

Ownership of important raw materials

Question 4

What are homogeneous products

Answer 4

Goods that are essentially the same - but different grades are possible

Question 5

What are homogeneous goods associated with

Answer 5

Perfect competition

Question 6

What are non-homogeneous goods

Answer 6

Products differentiated from their competitors

Question 7

What does market conduct refer to

Answer 7

How businesses actually behave in the industries in which they operate

Question 8

What affects market structure

Answer 8

Performance and conduct

Question 9

When does market power occur

Answer 9

When businesses can influence market price without losing a high proportion of sales

Question 10

What is the XED when there are only a few close substitutes in a market

Answer 10

Low

Question 11

How do businesses gain market power

Answer 11

Few close substitutes = low XED = set higher prices = supernormal profits (+ barriers to entry and exit)