Economics notes : Market structure,Costs,Firms motivations & growth

HideShow resource information
  • Created by: Lottie
  • Created on: 19-09-12 15:01
Preview of Economics notes : Market structure,Costs,Firms motivations & growth

First 240 words of the document:

Market structure
Perfect Monopoly Oligopoly Monopoly
No. Of firms Many Many Few 1
Freedom of Not restricted Not restricted Some barriers of High barriers of
entry entry entry
Influence over None Some Some Price maker
price subject to
demand curve
Nature of Homogenous e.g. Differentiated Varied e.g. cars, No close
product carrots e.g. fast food mobile phones substitutes e.g.
outlets, travel PC operating
agents systems, local
water system
Perfect competition
Price takes
No individual firm is large enough to be able to influence price
Price set by market as a whole
Freedom of entry/exit
If firm makes abnormal profit, other firms attracted= competed away
If not enough profit to remain in market= exit
1 firm in operation
Combination of price and output to maximise profits
Freedom to set price according to the demand curve
No close substitutes= no competition
Barriers of entry for other firms
Monopolistic competition
Have some influence over their selling price, but take into account there are other firms in
the market
Similar BUT not identical products
Some scope of influence e.g. brand loyalty or special cooking style in certain area
How do monopolies arise?
Authorities e.g. post office
Patent system to protect innovations

Other pages in this set

Page 2

Preview of page 2

Here's a taster:

Technology: no room for more than 1 firms tends to happen where there are substantial
fixed costs of production e.g.…read more

Page 3

Preview of page 3

Here's a taster:

Total,marginal and average costs
AC: TC / Q
MC: cost of producing one more
Costs facing firms
Short run the firm faces limited flexibility
Varying quantity of labour input
Varying the amount of capital the firm has as its disposal may take longer
Labour flexible Capital fixed
Costs in the short run
Firms cannot vary some of its inputs in the short run
Costs: fixed/variable
Short run some fixed costs (costs that…read more

Page 4

Preview of page 4

Here's a taster:

Firms Motivation
Motivations of firms
Exist to organise production
What motivates them to produce particular level of output and price?
Profit maximisation
Profits= total revenue- total costs
Set out to maximise profits BUT there is opportunity cost = required rate of return
regarded as fixed cost
Short run
Remain in market even if not covering opportunity costs
Provided its revenues are covering its variable costs
Pay off part of fixed costs than existing & losing all fixed costs
AVC= shut down price which below the…read more

Page 5

Preview of page 5


No comments have yet been made

Similar Economics resources:

See all Economics resources »See all resources »