- Great Britain (uk)
- Hills Road Sixth Form College
- Economics C03
Last Modified: 2014-06-08
- Many firms
- Freedom of entry and exit
- Brand differentiation- leads to inelastic demand, allowing profit maximising (MC=MR)
- Leads to supernormal profit where AR>AC
- Specialisation and division of labour
- Bulk buying
- Financial economies
- Risk bearing
- Productive- when an economy is producing on the PPF.
- Allocative- when goods and services are distributed in the most efficient way.
- Efficiency- When firms cut production costs with most efficient use of resources.
- Dynamic- Efficiency in LR
- No economies of scale- too many small firms
- Undifferentiated products
- Lack of supernormal profit
- With perfect knowledge, no firm has incentive to develop.
- Can cause market failure without gov intervention.
- Dominated by few firms
- Interdependence of firms
- Barriers to entry
- Differentiated products
- Product development
- Loyalty cards
- After sales service
- More likely in recession
- tend to occur in SR
- Benefit for lower Economies of scale (lower AC)
- Low barriers to entry- more contestable & competitive
- High fixed costs
- Legal monopoly
- Geographical barriers
- Allocative inefficiency- P>MC
- Productive inefficiency (QM is not lowest point on AC)
- No incentive to cut costs, AC is higher than it should be
- High prices ➡️ lower consumer surplus
- Quality will be low
- May have monopsony power, leading to lower wages
- Economies of scale
- Research and development
- International competitiveness
- Monopolies can be efficient (Google)
- No sunk costs
- Perfect information
- Freedom to advertise
- Lower prices
- Increased incentive to cut costs
- Incentive to repsond to consumer preference
- Significant economies of scale
- Remove legal barriers
- Legislation about pricing/monopoly power
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