|Dudley College of Technology | |Market Structures | | | |
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Chapter 6 After reading this chapter‚ you should be able to: LO6-1 Use elasticity to describe the responsiveness of quantities to changes in price and distinguish five elasticity terms. LO6-2 Explain the importance of substitution in determining elasticity of supply and demand. LO6-3 Relate price elasticity of demand to total revenue. LO6-4 Define and calculate income elasticity and cross-price elasticity of demand. LO6-5 Explain how the concept of elasticity makes supply and demand analysis more
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have the weapons to wage war against such fierce competition against the foreign firms but the Government did not fail to rule out the possible defences to resist the competition posed by the foreign firms to protect its own domestic market. The ‘Monopolies and Restrictive Trade Practices Act of 1969’ turned out to be the most sought after ‘Defence Mechanism’. The history of the Indian competitive legislation goes back to the
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Economics 130: Exam 3 Study Guide 1) Which market model has the least number of firms? a. Pure monopoly 2) There is no control over price by firms in: a. Pure competition 3) Which is true under conditions of pure competition? a. A large number of firms b. Standardized product (meaning no product differentiation) c. Price takers (no exertion over product price) d. Free entry and exit in and out of the market e. Individual firms have a perfectly elastic demand curve‚ but whole industries
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shop for the product. The idea is to only try to sell the product‚ such as shampoo‚ only to a subset of people such as people‚ who for example‚ think their hair is oily. This is why the same company puts out multiple brands and multiple variations of each brand. MONOPOLISTIC COMPETITION In the short run these markets look like mini monopolies as illustrated on page 225. In the long run any successful idea will be copied‚ thereby eroding any economic profits. MONOPOLISTIC
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monopolistic competition. According to Economics Online‚ “the model of monopolistic competition describes a common market structure in which firms have many competitors‚ but each one sells a slightly different product” (Economics Online). There are many examples of monopolistic businesses and a few that were mentioned in the article were Microsoft‚ Sirius‚ XM Radio and Jostens (a company that sells high school rings). If you think about each of these companies you will realize the products they sell are
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are four such categories. At one extreme is perfect competition‚ where there are very many firms competing. Each firm is so small relative to the whole industry that it has no power to influence price. It is a price taker. At the other extreme is monopoly‚ where there is just one firm in the industry‚ and hence no competition from within the industry. In the middle come monopolistic competition‚ which involves quite a lot of firms competing and where there is freedom for new firms to enter the industry
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supply – Control of market price – The high market share and power means that the dominant firm has control of the market price instead of the market as a whole. Monopolies – A monopoly is an economic market condition where one seller dominates the entire market. A monopoly occurs if a firm has 25% of the market shares. A natural monopoly can happen when it is most efficient for production e.g. Post office Oligopoly – An oligopoly is an economic market condition where numerous sellers have their
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should take over the firm(s) at the successive retail stage. Explain the circumstances under which such a takeover raises the profits of the monopoly producer. Also‚ discuss why vertical integration might not increase the profits of the producer. It is commonly believed that vertical integration is an attempt to create monopoly and to seek rents. Monopoly theories of vertical integration explain it as the instrument of price discrimination and the creation of entry barriers. Alternatively economic
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firm can increase its profits at the expense of consumers’ surplus (see Figure 1.) This‚ of course‚ happens when that firm has market power to discriminate-when the market is oligopolistic or the firm is a monopoly (there is little price discrimination in the market for washing powder‚ for example). There are three degrees of price discrimination: the first degree means charging each consumer as much as she wants to pay‚ therefore extracting all the consumer surplus (see Figure 1). This is difficult
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