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market structures
Fichas del conjunto (19)
- 1what is allocative efficiency?the point at which price is equal the the marginal cost. people are paying exactly how much it cost to produce the last unit.
- 2what is productive efficiency?productive efficiency is where a firm is producing at the lowest point on the AC. lowest price that a consumer can enjoy.
- 3dynamic efficiency?dynamic efficiency is a measure of ability to operate efficiently in the long run. this focuses on reducing long run costs by producing more efficiently, e.g investing in capital etc.
- 4x-inefficiency:when prices rise due to lack of competition. there is no additional incentive in producing at competitive prices. already holder of market.
workers may not work as hard to increase sales volume. if wages are not dependant on revenues - 5characteristics of perfect competition:many buyers and sellers.
perfectly elastic demand- horizontal- Mr =AR
no barriers to entry
perfect knowledge - 6pattern on Perfect competition?in the short run: supernormal profits.
these profits attract other firms into the industry.
no barriers to entry.
increase in firms means shift in supply curve and competitive pricing which shifts down,
in the long, they operate and productive efficiency.
they make normal profits - 7characteristics of monopolistic competitionmany buyers and sellers.
monopolistic competition firms produce differentiated, non-homogenous goods or services, some price making power
firms are price makers.
low barriers to entry leaving firms to enter when supernormal profits and leave when losses leaving normal prof in the long run.
They are likely to be dynamically efficient since there are differentiated products
and so know that innovative products will give them an edge over their competitors
all firms aim to profit maximise - 8characteristics of an oligopoly?high barriers to entry and exit, making it less competitive.
High concentration ratio in an oligopoly, only a few firms supply the majority of the market
Firms differentiate their products from other firms using branding.
interdependence, one firms behaviour influences another firm - 9what is the n-firm concentration ratio?it is the total market share collectively added up from the top n-firms
- 10why does collusive behaviour occurCollusive behaviour occurs if firms agree to work together on something. maximise their benefits
Collusion is more likely to happen where there are only a few firms - 11why does non collusive behaviour occur?Non-collusive behaviour occurs when the firms are competing. This establishes a competitive oligopoly. This is more likely to occur where there are several firms, one firm has a significant
cost advantage, products are homogeneous and the market is saturated. - 12what is overt and tacit collusion?overt: Overt collusion is when a formal agreement is made between firms. It works best when there are only a few dominant firms
tacit: unspoken collusion, illegal
+collabs could lead to improvements in the industry
+ saves on duplicate research and development
-consumer surplus reduced
-no incentive to be productively efficient - 13what are cartels?A cartel is a group of two or more firms which have agreed to control prices, limit output, or prevent the entrance of new firms into the market
- 14what is price leadership?Price leadership: one firm changes their prices, and other firms follow. This firm is
usually the dominant firm in the market.
Other firms are often forced into changing their prices too, otherwise they risk losing their market share. stabilises prices - 15what is game theory: prisoners dilemna ?Game theory is related to the concept of interdependence between firms in an oligopoly. It is used to predict the outcome of a decision made by one firm, when it has incomplete information
about the other firm. - 16what is game theory: prisoners dilemna ? explanation:without collusion prisoners have to pick what's best strategy irrespective of what other one pick.
where collusion occurs, one party picks best strategy with information about the other party. Nash equilibrium - 17what is nash equilibrium?Nash equilibrium is a concept in game theory which describes the optimal strategy for all players, whilst taking into account what opponents have chosen. They cannot improve their position given the choice of the other.
- 18types of price competition:price wars: firms constantly cutting their prices below that of its competitors. Their competitors then lower their prices to match
predatory: setting low prices to drive out firms already in the industry. it leads to them making losses.
limit: Low prices discourage the entry of other firms, so there are low profits. It ensures the price of a good is below that which a new firm entering the market would be able to sustain - 19types of non - price competition.improve the quality of their customer service
They might keep their shops open for longer, so consumers can visit
when it is convenient.
Special offers, such as buy one get one free.
improve marketing
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- Descripción
- A level (Micro Economics 3) Economics Fichas sobre market structures, creado por Daniel Nnajiuba el 18/09/2020.
- Creado por
- Daniel Nnajiuba
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