Micro Examples

Question 1

Examples of collusive oligopoly

Answer 1

OPEC

Question 2

What are OPECs obligations

Answer 2

Stabilises oil prices
Regulates oil production (fair price for consumers and producers)
Ensures interests of oil exporting countries are upheld

Question 3

Negatives of OPEC

Answer 3

Price manipulation
Lacklustre climate change actions preventing switch to renewables
Negative impacts on no member countries

Question 4

examples of when profit motive has solved market failure without need of government

Answer 4

• electric car innovation
• wheight loss drugs
• Starbucks
• bodyshop

Question 5

examples of markets that are failing specific to uk

Answer 5

• Housing market
• child care
• vaping
• vet

Question 6

examples of hysteresis

Answer 6

• Covid 19 pandemic (hospitality and travel industry)
• Investor confidence after 2008 (S&P 500 took untill 2013 to be fully recovered)

Question 7

example of profit maximizing firms

Answer 7

pharmaceuticals/skincare (due to economics of scale and dynamic efficiency needs)

Question 8

examples of profit satisficing

Answer 8

Walmart, (even though trump cut cooperation tax Walmart used this as an opportunity to increase wages)

Question 9

examples of revenue maximizing

Answer 9

Twitter - focused on revenue maximizing as they where spending in advertising and good account growth (Elon changed this to profit max in order to keep shareholders happy)

Question 10

Predatory pricing examples

Answer 10

The Times newspaper reduced its prices on a Monday to 10p to deliberately drive out competition 1996

Question 11

sales growth and limit pricing examples

Answer 11

Spotify and Netflix grew accounts for many years before switching to profit max, amazon barely made a profit for 2 decades.
Tesla reduced prices of there electric cars in order to keep competitive with chinese, amazon

Question 12

Survival

Answer 12

fast food market

Question 13

cooperate and social responsibility

Answer 13

Starbucks paying coffee producers fair cut and committing to environmental been harvesting.
body shop not testing products on animals

Question 14

perfect competition examples

Answer 14

• TUk TUks
• forex

Question 15

monopoly power

Answer 15

• Google has 92%, and has been accused of directing customers to its products
• Durex - 84% in uk in market for merit good

Question 16

Natural monopoly’s

Answer 16

water companies

Question 17

monopolistic comp

Answer 17

clothing market, uk bars and nighclubs/ coffee shops

Question 18

oligopolys

Answer 18

supermarkets uk - competitive
Opec - collusive
energy providers (often requires regulation by ofgem)

Question 19

contestable markets

Answer 19

Electric car markets (potential for profit, innovation and creative destrucion)
online retial, youtube

Question 20

Monopoly intervention

Answer 20

• Advaz (pharmaceutical) got fined 100 million for increasing price 6000% over the past decade (caused huge strain on the nhs)
• Energy companies face 38% windfall on profits for oil and gas (this has been used for redistribution) (this has caused lack of investment and job losses)

Question 21

Regulatory capture

Answer 21

water leaks and sewage spills from uk water companies due to poot investment however water companies are still paying high dividends to shareholders
ofwat has been late to intervene and has been accused of turning a blind eye

Question 22

privitisation

Answer 22

Royal mail previously loss making since prvitisation have seen profits increase from cost cutting and
reducing labour costs
-11000 jobs in 3 days

failed : UK rail, with low investment rates and low competition has led to government subsidy’s and the retake of the leases once the contracts of the rail companies end if they fail to meet performance standards

Question 23

deregulation

Answer 23

EU open skies liberalized air travel between Europe and US fostering competition and allowing for more choice for consumers, influx of competitive firms and allowed low cost option like Ryan air and easy jet to thrive
- however, cost cutting in dangerous areas

Question 24

Nationalisation

Answer 24

GB energy
ensure energy security with profits reinvested into business

Question 25

Price cap

Answer 25

up to 2021 energy price caps had saved consumers £100 a year without impacting competition. from 2021 - 2023 wholesale gas prices increased four fold causing bankruptcy for small energy providers as price cap did not increase in line

Question 26

indirect taxes

Answer 26

France and Switzerland propsed raises to indirect taxes on fuel - caused protests due to regressive nature and dent to disposable income, the plans where scrapped. In France the plans where scrapped and in Switzerland the government decided to reduce the burden on consumers

Question 27

Subsidy

Answer 27

Heat pumps, electric cars, museums, EU farmers

Question 28

Minimum price

Answer 28

EU common agricultural subsidy aims : ensure food security, safeguard farm income incentivize environmental practices problems - food surplus, regressive

Question 29

Asymmetric information

Answer 29

Uk vet market investigated by CMA (competition and markets authority)

Question 30

common access resources

Answer 30

Overfishing, Deforestation on Malaysia

Question 31

State provision

Answer 31

- NHS huge excess demand, covid waiting lists, high cost massivley increased living standards

Question 32

Government failure

Answer 32

Black markets : cigarette market is worth two billion HS2: spiraling costs and inefficiency has left the line unfinished

Question 33

scarcity

Answer 33

Indian water - impacts farmers and households, main causes - population growth and poor households consequences - impacts food supply, environment degradation and economic growth

Question 34

allocation of resources

Answer 34

state provision of healthcare government objectives vs defense spending unintended consequences of policy

Question 35

Social tariff

Answer 35

Price descriminating for the social good Energy componeys

Question 36

example of how minimum wages do not increase unemployment

Answer 36

Card and Kruger study found that raising minumum wages in the us did not massively increase unemployment