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Questions and Answers
What is a characteristic of a monopoly market structure?
What is a characteristic of a monopoly market structure?
- The firm has no control over the market price
- Price is determined by the interaction of many buyers and sellers
- The firm has some degree of market power (correct)
- There are many firms producing identical products
What is a key factor that determines the output of a monopoly firm?
What is a key factor that determines the output of a monopoly firm?
- The desire to maximize profit (correct)
- The willingness of consumers to pay
- The fear of losing customers
- The uniqueness of the product
What is the primary difference between a monopoly market structure and a perfect competition market structure?
What is the primary difference between a monopoly market structure and a perfect competition market structure?
- The degree of market power (correct)
- The level of consumer demand
- The number of firms in the market
- The level of government regulation
What is the term for the external factors that affect a business, including macroeconomic factors?
What is the term for the external factors that affect a business, including macroeconomic factors?
What is an example of an internal environment factor?
What is an example of an internal environment factor?
What is the primary goal of a monopoly firm's pricing strategy?
What is the primary goal of a monopoly firm's pricing strategy?
What is a characteristic of a duopoly market structure?
What is a characteristic of a duopoly market structure?
What is the term for the analysis of macroeconomic factors that affect a business?
What is the term for the analysis of macroeconomic factors that affect a business?
What is a key factor that determines the market price in a monopoly market structure?
What is a key factor that determines the market price in a monopoly market structure?
What is the primary goal of a firm's output decision?
What is the primary goal of a firm's output decision?
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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
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