Chapter 3

Question 1

Consumer surplus

Answer 1

Difference between the price cust. Actually pay and the maximum price they are willing to pay

Question 2

Oligopoly

Answer 2

Dominated by a small number of major companies

Question 3

Duopoly

Answer 3

Market dominated by two firms

Question 4

Porter’s 5 Forces competition framework

Answer 4

Horizontal competition: substitutes,entrants,established rivals
Vertical competition: power of suppliers,power of buyers

Question 5

Sunk cost

Answer 5

Investment whose value cannot be recovered on exit

Question 6

Intensity of competition results from:

Answer 6

Concentration(concentration ratio:the combined market share of leading producers),diversity of competitors,product differentation,excess capacity and entry barriers,cost conditions(scale economies and the ratio of fixed to variable costs)

Question 7

Architectural advantage

Answer 7

Identifying and then controlling actual and potential “bottlenecks” within industries

Question 8

Key succes factors

Answer 8

Determine firm’s ability to survive and prosper(supply what customers want anc survive competition)