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6. Using real world examples from your own economy, describe the main forms
of competition in the marketplace ie perfect, oligopoly, monopoly and
imperfect.
Perfect Competition Fixed price, lots of firms, no one dominating firm, same
price and product
Monopoly One firm sells product / dominates market, Firm sets price due to
sole provider, Abnormal Profits
Oligopoly A few firms dominate the market, Price makers due to less
competition, can collude for abnormal profits
7. Examine the benefits and drawbacks of each form of competition in terms of
efficiency, choice, quality and innovation.
Efficiency
Choice
Quality&Innovation
Perfect
Prices not set by
Lots of choice
Higher quality due
one firm, similar from competing
to competition
efficiency, Price
firms
takers. Effeciency
will be greater to
maximise profit
Imperfect
Oligopoly
Prices set by
Less choice, can
Less innovation due
firms, Price
be set by firms
to less competition,
makers. Not as
due to collusion
OK quality due to
efficient as
less pressure to
perfect market
stand out
Monopoly
Price set by one
Choice set by
Tends to have less
firm, can lead to
firm
quality as no
abnormal profit.
competition means
Not as efficient as
take it or leave it.
no competition
Innovation leads to
maximising output
(efficiency) which
can be transferred
to the consumer.
8. Explain why and how governments seek to control monopoly power and how
they achieve this, through monopoly and merger legislation.
To control monopoly power, governments put competition laws in place to
prevent companies from owning too much market share. They can impose fines
and imprisonment on firms that break the law. Merger laws prevent mergers
and takeovers from happening when they effectively lessen competition to a
significant degree. This decreases the quality of product the consumer receives
and slows economic growth.
9.
REFERENCES
Moynihan and Titley: Chapters 5, 7 and10
Anderton: Units 34 to 36 and 40 to 44
KEY TERMS
Sole trader
Partnership
Limited liability
Incorporation
Board of Directors
Shareholders
Co-operative
Public Corporation
Nationalisation Privatisation Product differentiation Branding
Barriers to entry Regulation Merger`