Competitive and concentrated markets Flashcards

1
Q

What are the objectives of firms?

A

Survival
Growth
Market share

Others - Employee welfare, protection of the environment, ethical behaviour

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2
Q

Abnormal profit is competed away due to…

A

More firms entering the market due to there being no barriers to entry, ensuring only normal profit is made

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3
Q

When does a pure monopoly exist?

A

When there is a single supplier in a market

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4
Q

UK law suggests that a 25% market share gives firms…

A

Monopoly power

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5
Q

What makes monopoly power greater?

A

Barriers to entry
Few competitors
Perceived differences between products

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6
Q

Characteristics of perfect competition

A
Number of firms = Many
Product differentiation = None
Barriers to entry = None
Knowledge = Perfect 
Influence of a firm on price = Zero
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7
Q

Characteristics of monopolistic competition

A
Number of firms = Many
Product differentiation = Some
Barriers to entry = Few
Knowledge = Widespread
Influence of a firm on price = Low
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8
Q

Characteristics of a oligopoly

A

Number of firms = Few
Product differentiation = Relatively high
Barriers to entry = Many
Knowledge = Restricted
Influence of a firm on price = Quite high

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9
Q

Characteristics of a monopoly

A
Number of firms = One
Product differentiation = Unique
Barriers to entry = Very many
Knowledge = Restricted
Influence of a firm on price = Very high
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10
Q

What does a concentration ratio measure?

A

The combined market share of the biggest firms in a market

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11
Q

How do you find the concentration ratio of a market?

A

Add up the market shares of the largest firms in the market

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