Y1 Competitive and concentrated markets

Question 1

Characteristics of a perfectly competitive market

Answer 1

Homogeneous products
Many suppliers
No barriers to entry
Perfect info
Firms are price takers not setters
Firms are fully efficient

Question 2

Monopsony

Answer 2

Only one buyer in a market

Question 3

Monopoly power & characteristics

Answer 3

> 25% market share
Differentiated products
Price maker & prof maxer
High barriers & imperfect info

Question 4

Pros of monopoly

Answer 4

Dynamic efficiency
Research and development
International competitiveness
Natural monopolies

Question 5

Cons of monopoly

Answer 5

Higher prices & less choice
No allocative or productive efficiency
Less consumer surplus & deadweight loss
Supernormal profits

Question 6

Liberalisation

Answer 6

Lessening of gov regulations and restrictions to increase competition

Question 7

When does privatisation fail

Answer 7

When consumers have no choice (water,trains etc) and investment is paid by higher bills. So firms can’t make much profit.

Question 8

What happened to the UK energy market DELETE

Answer 8

Privatised in 1980s and deregulated. Now dominated by: British Gas, EDF, EON, npower, SSE and Scottish power. Their monopoly power means they can charge high prices.