Market structures

1 Efficiency

a) The concepts of:

• allocative efficiency

• productive efficiency

• dynamic efficiency • X-inefficiency

• efficiency/inefficiency in different market structures.

 

2 Concentration ratio

a) Calculation of n-firm concentration ratios.

b) The significance of concentration ratios.

 

3 Perfect competition

a) Assumptions of perfect competition.

b) Profit-maximising equilibrium in the short run and long run.

c) The short-run shutdown point. d) Productive and allocative efficiency in the short run and long run.

 

4 Monopolistic competition

a) Assumptions of monopolistic competition.

b) Types of product differentiation:

• physical – product features

• marketing – advertising, packaging

• distribution – shop, online, telephone.

c) Profit-maximising equilibrium in the short run and long run.

d) Productive and allocative efficiency in the short run and long run.

 

5 Oligopoly

a) Assumptions of oligopoly.

b) Barriers to entry and exit:

• economies of scale • limit pricing

• patents • branding • sunk costs • legal.

c) Interdependence of firms:

• simple game theory – two firm/two outcome model

• reasons for collusive and non-collusive behaviour

• cartels • price leadership • price wars.

d) Costs and benefits of collusion to producers, consumers, workers and governments.

e) Price competition:

• price wars • predatory pricing • limit pricing 

f) Non-price competition:

• advertising and branding • quality • endorsement • product placement • after-sales service.

g) Costs and benefits of price and non-price competition to firms, consumers, employees and suppliers.

 

6 Monopoly

a) Assumptions of monopoly.

b) Barriers to entry and exit.

c) Profit-maximising equilibrium.

d) Costs and benefits of monopoly to firms and consumers.

e) The concept of ‘natural monopoly’ and its implications.

f) Conditions necessary for third-degree price discrimination.

g) Costs and benefits of price discrimination to firms and consumers.

h) Productive, allocative and dynamic efficiency.

 

7 Monopsony

a) Assumptions and conditions for a monopsony to operate.

b) Costs and benefits of a monopsony to firms, consumers and employees.

 

8 Contestability

a) Characteristics of contestable markets.

b) Implications of contestable markets for behaviour of firms on:

• profitability • pricing decisions (limit pricing).

c) Costs and benefits of contestability for firms and consumers.

d) The significance of sunk costs for contestability.