Quick Tips for Unit 3: Business Economics and Economics Efficiency Exam

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Quick Tips for Unit 3: Business Economics and Economics
Efficiency Exam
Section B: Data Response
1.. The first question will always carry 4m and it involves definitions e.g. patents, horizontal
integration, economies of scale etc plus a reference
3. Watch out for the following questions:
a) Contestability. You may say that the industry of concern is not contestable due to its oligopolistic
feature e.g. high R&D expenditures, expensive equipments, high advertisements budget, patents
etc and for evaluations, it is contestable due to factors like niche market, internet marketing etc
b) Efficiency. Focus not only on productive and allocative efficiency but also on other form of
efficiency like technical, dynamic and static efficiency
c) Pricing strategy (may involve game theory) and non-pricing strategy. Kind of a tricky question.
Provide the 2x2 matrix and explain that Firm A is undercutting its rival in order to steal market share
and enlarge its super normal profits and then another non-pricing strategy.
In youe Evaluation you may refer back to the game theory and mention that such price war will lead
to a lose-lose situation and hence most likely to collude
d) Benefits of merger between oligopoly firms
e) Role of regulators e.g. OFT/ Competition Commission/ ECC/ Ofwat/ Ofgen/ Oftel and price
4. Watch out on how they phrase those questions. Sometimes, the easiest and the most common
question can be phrased into something 'bombastic' and you might think that it is a new question. For
e.g. 'To what extent does the threat of competition change the behaviour of the firms' is a
'bombastic' version of 'Explain one pricing strategy and one non-pricing strategy that could be
adopted by an oligopoly firm'
5. You may give different types of economies of scale/ efficiency and it will be regarded as separate
points. This is applicable to questions that are relevant
7. For those who are running out of time for revision, focus on monopoly and oligopoly. Data
response will always linger around these two. By the way, focus on some new topics. They are hits in
recent years e.g. PPP (Public Private Partnerships), PFI (Private Finance Initiatives), rate of return/
profit capping and performance targets


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