Theme 3 Flashcards
(42 cards)
What is Monopoly Power?
Turing Pharmaceuticals raised the price of AIDS tablets from $13 to $750 overnight
This illustrates how a company with monopoly power can dramatically increase prices without competition.
What is Predatory Pricing?
Temu loses $500mn annually trying to break into western markets
Predatory pricing involves setting prices low to eliminate competition, often resulting in substantial losses.
What was the outcome of the supermarket price war in 1995?
Tesco sold baked beans for 3p and Asda for 5p
This price war illustrates competitive pricing strategies in retail.
What is Limit Pricing?
Walmart frequently uses limit pricing to keep small shops out of the market
Limit pricing is a strategy where a firm sets prices low enough to deter new entrants.
What is Overt Collusion?
Virgin and British Airways colluded in 2010, resulting in BA paying £270mn in fines
Overt collusion refers to explicit agreements between firms to coordinate prices or output.
What is Tacit Collusion?
Citi, HSBC, Morgan Stanley, and RBC were fined £100mn for sharing information about gilts
Tacit collusion occurs when firms indirectly coordinate actions without explicit agreements.
What was the peak youth unemployment rate in the UK in 2024?
14.8%
Youth unemployment rates are critical indicators of economic health and labor market conditions.
What is X-inefficiency?
Thames Water secured a £3bn loan to help cover its x-inefficiency-related costs
X-inefficiency refers to the inefficiency that occurs in a firm due to lack of competition.
What is Dynamic Efficiency?
Starbucks spent around $15mn on researching how to improve the taste and design of their drinks
Dynamic efficiency focuses on innovation and improvements over time.
What is a Sunk Cost?
TFL incurred £12bn in costs when it set up its networks
Sunk costs are expenses that cannot be recovered after an investment is made.
What is Brand Loyalty?
16mn people use a Tesco clubcard
Brand loyalty refers to consumers’ commitment to repurchase or continue using a brand.
How many people are currently on zero-hour contracts?
1mn people
Zero-hour contracts are employment agreements where the employer does not guarantee any hours of work.
What percentage of workers in the UK are unionised?
1/4 of all workers
Unionisation rates can impact labor negotiations and worker rights.
What is the Maximum Wage cap set by the EU for banker bonuses?
100% of their salary or 200% with shareholder approval
This regulation aims to limit excessive compensation in the banking sector.
What is the number of hair businesses operating in the UK under Perfect Competition?
48,000
Represents a highly competitive market structure with many sellers
How many cafes and coffee shops operate in the UK under Monopolistic Competition?
7,700
Indicates a market with many firms offering differentiated products
What is the firm concentration ratio of the UK supermarket industry under Oligopoly?
66%
Shows a market dominated by a few large firms
What percentage of the search engine market share does Google own?
93%
Illustrates a monopoly in the search engine sector
What market share did Windows have in 1985 as a Pure Monopoly?
100%
Represents complete market control by a single firm
What percentage of control does the NHS have over the UK healthcare market?
Over 90%
Indicates a monopsony in the healthcare sector
What type of economies of scale did Virgin exemplify by creating 400 different products?
Risk-bearing EoS
Refers to the ability to spread risk across a diverse product range
What type of economies of scale does JP Morgan utilize by having specialist managers?
Managerial EoS
Involves efficiencies gained through specialized management
Why does Alibaba secure low-interest loans?
Because they are trustworthy
Reflects Financial EoS through a strong reputation
How does CostCo achieve Purchasing EoS?
By purchasing food and beverages in vast quantities
Results in reduced per-unit costs
