10 Questions
What is a characteristic of a monopoly market structure?
The firm has some degree of market power
What is a key factor that determines the output of a monopoly firm?
The desire to maximize profit
What is the primary difference between a monopoly market structure and a perfect competition market structure?
The degree of market power
What is the term for the external factors that affect a business, including macroeconomic factors?
Business environment
What is an example of an internal environment factor?
The company's management structure
What is the primary goal of a monopoly firm's pricing strategy?
To maximize profit
What is a characteristic of a duopoly market structure?
There are only two firms producing identical products
What is the term for the analysis of macroeconomic factors that affect a business?
Pestle analysis
What is a key factor that determines the market price in a monopoly market structure?
The market power of the firm
What is the primary goal of a firm's output decision?
To maximize profit
Study Notes
Imperfect Competition
- Monopolistic competition requires product differentiation to attract customers
- Price and output decisions are determined by individual seller position in the market, uniqueness of product, and demand
Pricing and Output Decisions (Imperfect Competition)
- Price is determined by individual seller position in the market
- Output is determined by profit-maximization, taking into account the purchasing power of customers for unique products
Oligopoly Market
- Characterized by competition among a small number of large firms with market power
- Few players dominate the market, determining prices
- Examples: soft drink market (Pepsi & Coke), banking sector, telecommunication, oil sector
Characteristics of Oligopoly Market
- Industry dominated by a small number of large firms
- High barriers to entry
- Products could be highly differentiated or homogeneous
- Non-price competition and high degree of interdependence between firms
- Potential for collusion between firms
Advantages and Disadvantages of Oligopoly Market
- Advantages: some competition, consumer benefits, lower cost of production, price stability, innovation, and better choices for consumers
- Disadvantages: firms may collude on prices, huge spending on advertising and promotion, increasing cost of product for consumers
Pricing and Output Decisions (Oligopoly Market)
- Price is determined by market share of each individual player
- Output is determined by looking at market demand and other market leaders
Monopoly Market
- Characterized by a single seller or firm with complete control over the market
- Price is determined at the will of the monopoly firm
- Output is determined by the desire to control market price and maintain uniqueness of product
Pricing and Output Decisions (Monopoly Market)
- Price is determined by market power of the firm without considering consumer willingness to pay
- Output is determined by demand for uniqueness of product and fear of losing customers
Business Environment
- Business environment refers to the external forces, factors, and institutions that influence the functioning and growth of individual enterprises
- Includes macro factors such as PESTLE analysis (Political, Economic, Social, Technological, Legal, and Environmental)
Types of Business Environment
- Internal Environment (The Company): direct impact over the business, controllable, and can be altered or modified
This quiz covers the concepts of monopolistic competition, product differentiation, and imperfect market structures. It includes topics such as pricing and output decisions in imperfect competition and the advantages and disadvantages of monopolistic competition.
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