perfect competition, imperfectly competitive markets, monopoly Flashcards
(37 cards)
What is the spectrum of competition?
A range from perfect competition to pure monopoly.
What factors are used to distinguish different market structures?
(A) Number of firms. (B) Degree of product differentiation. (C) Ease of entry.
What is the traditional assumption about a firm’s objective?
Firms aim to maximise profit.
What is the profit-maximising rule?
Profit is maximised when MC = MR.
What is the divorce of ownership from control?
When owners (shareholders) are separate from managers, leading to different goals.
What alternative objectives might firms have?
(A) Survival. (B) Growth. (C) Quality. (D) Sales revenue maximisation. (E) Market
share increase.
What is the satisficing principle?
Making satisfactory profits rather than maximising.
What are the key assumptions of perfect competition?
(A) Large number of buyers and sellers. (B) Identical products. (C) Free entry and
exit. (D) Perfect information.
What is the role of firms in a perfectly competitive market?
Firms are price takers.
Why is perfect competition considered efficient?
Allocative and productive efficiency is achieved when there are no externalities.
What are the characteristics of monopolistic competition?
(A) Many firms. (B) Differentiated products. (C) Low barriers to entry.
How does non-price competition feature in this market structure?
Firms compete via advertising, branding, product features.
What are the characteristics of oligopoly?
(A) Few dominant firms. (B) High entry barriers. (C) Product differentiation may vary.
What is a concentration ratio?
% of market share held by the largest firms.
What is the difference between collusive and non-collusive oligopoly?
Collusive: firms cooperate. Non-collusive: firms compete independently.
What is the kinked demand curve model?
Explains price rigidity due to asymmetric response to price changes.
Why does non-price competition occur in oligopoly?
To avoid price wars and maintain stability.
What is price leadership?
One firm sets price, others follow.
What is hit-and-run competition?
Firms enter a market for short-term profit.
What are the pros and cons of oligopoly?
(A) Pros: innovation, economies of scale. (B) Cons: higher prices, collusion.
What factors influence monopoly power?
(A) Barriers to entry. (B) Advertising. (C) Number of competitors. (D) Product
differentiation.
What are the pros and cons of monopoly?
(A) Pros: economies of scale, innovation. (B) Cons: higher prices, inefficiency, less
choice.
What are the conditions needed for price discrimination?
(A) Market power. (B) Different price elasticities. (C) Market separation.
What are the pros and cons of price discrimination?
(A) Pros: increased revenue, access to lower prices for some consumers. (B) Cons:
some pay more, may exploit consumers.
