Chapter Nine: Competitive Markets 9.1 Market Structure and Firm Behaviour Market structure: all features of a market that affect the behaviour and performance of firms in that market‚ such as the number and size of sellers‚ the extent of knowledge about one another’s actions‚ the degree of freedom of entry‚ and the degree of product differentiation. Competitive Market Structure Market power: the ability of a firm to influence the price of a product or the terms under which it is sold. The
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AND ECONOMIES OF SCOPE Economies of scale are reductions in average costs attributable to production volume increases. They typically are defined in relation to firms‚ which may seek to achieve economies of scale by becoming large or even dominant producers of a particular type of product or service. A distinction can be made between internal and external economies of scales. Internal economies of scale occur when a firm reduces costs by increasing production. External economies of scale occur when
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by looking at changes in average costs at each stage of production. How does a firm expand? A firm can increase its scale of operations in two ways. Internal growth‚ also called organic growth External growth‚ also called integration - by merging with other firms‚ or by acquiring other firms By growing‚ a firm can expect to reduce its average costs and become more competitive. Long run costs The firm’s long run average cost shows what is happening to average cost when the firm expands‚ and
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Seattle for USA‚ Canada and Latin America‚ Frankfurt for Europe and Africa and Taiwan for Asia Pacific. Mission‚ Goals and Objectives: The Mission of the company is to produce world-class cameras marketed all over the world‚ produced at most optimum cost using best manufacturing practices‚ giving value for money to its customers and maximizing yield for its investors. The Strategic Goals of the company are: 1. To be among first five camera producers in a decade. 2. To manufacture world-class cameras
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Monopolistic competition Monopolistic competition is a form of imperfect competition where many competing producers sell products that are differentiated from one another (that is‚ the products are substitutes‚ but‚ with differences such as branding‚ are not exactly alike). In monopolistic competition firms can behave like monopolies in the short-run‚ including using market power to generate profit. In the long-run‚ other firms enter the market and the benefits of differentiation decrease with
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competitive firm ’s supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes its profits by choosing to supply the level of output where its marginal revenue equals its marginal cost. When marginal revenue exceeds marginal cost‚ the firm can earn greater profits by increasing its output. When marginal revenue is below marginal cost‚ the firm is losing money‚
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cyclone is on the cost curves of a bananas growing firm in the cyclone-affected region? In the short run‚ both average total cost (ATC) and marginal cost (MC) will increase. Based on the law of diminishing marginal returns‚ when products expand‚ the return of per unit product is decreasing. On the on the other hand both MC and ATC are increasing. The examples in this case are The nature of the problems which can arise from this can be seen in the case of the increase in the cost of bananas associated
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upward pressure on costs and an increased necessity for capital expenditures in order to compete. The less threat there is from firms entering the industry‚ the more stable a firm’s profits are. An attractive‚ low-risk industry‚ is one in which there are significant barriers to entry such as: Economies of Scale: The theory behind supply side economies of scale state is that the most efficient level of production in an industry is at the point in which the average total costs are at a minimum
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setting up in business. All firms produce an identical product. (The product is ‘homogeneous’.) There is therefore no branding or advertising. Producers and consumers have perfect knowledge of the market. That is‚ producers are fully aware of prices‚ costs and market opportunities. Consumers are fully aware of the price‚ quality and availability of
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Write your name here Surname Other names Pearson Edexcel Centre Number Candidate Number International Advanced Level Economics Unit 3: Business Economics and Economic Efficiency Friday 17 January 2014 – Morning Time: 1 hour 30 minutes You do not need any other materials. Paper Reference 6ECA3/01 Total Marks Instructions black ink or • Usein the boxesball-point pen. page with your name‚ at the top of this • Fill number and candidate number. centre in A and
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