Economics Unit 3 Edexcel Definitions

All the definitions that have come up in all the past papers, lifted from mark schemes 

25% of the market share, one seller in the market
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Role of Competition Comission
increase the level of competition, prevent anti-competitive behaviour
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Long run
All costs are variable in the long run
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Revenue maximisation
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Role of Ofwat/Ofcom/Ofgem
to promote consumer interests and consumer welfare (e.g. better quality service) they can levy fines
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Market Share
% of a market sales controlled by a firm
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Tacit collusion
firms co-operate but not formally, it is illegal, involves oligopolies acting interdependently
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Game theory (dominant strategy)
one firms make a profit at the expense of another
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Obtaining private funds for public sector projects that are rented to the gov. e.g. enables hospitals to be built earlier than previously thought possible, private sector more efficient, opportunity cost
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horizontal merger
firms are at the same stage of production process gaining economies of scale
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low sunk costs, low batters to entry or exit
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single buyer and many seller, allow commercial economies of scale, increases profits will or pass on lower prices to consumers
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VC/Q - dependent on output e.g. raw materials, cost of electricity
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widening of product range outside current areas of specialism
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conglomerete merger
merger of two firms in different markets, application to question + little cross-over
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slightly differentiated products, low barriers, price makers due to downward sloping D curve
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government intervention in markets
attempts to retain competition, retain jobs, keep investment within a country, make collusion less likely or macro arguments e.g. protect exports for BoP
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backwards vertical integration
production at different stages and moving closer to raw materials + application to question, benefits include control of supplies, prevent other firms from buying raw material, cheaper materials, capture profits
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Profit max
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Shut down
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Prevent shut down if...
contributing to FC
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independent of output e.g. rent
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downward sloping D curve
monopolist + monopolistic, price setting power
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horizontal D curve
perfectly elastic, price takers
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price discrimination
same product charged at different price for different people, conditions: different PEDS, large market share, no arbitrage
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firms splits into seperate firms e.g. avoid attention of competition authorities, lowers range of functions in a business reducing overall costs
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diseconomies of scale
lack of synergy, culture clash, communication problems
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deterrent or punishment to other companies for adopting mal practice
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% change in price/% change in demand
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making enough profit to survive, keep shareholders happy (identify a stakeholder)
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sales maximisation
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Euro Competition comission
proxy competitor
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allocatively efficiencent
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productively efficient
output at lowest point of AC curve
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dynamic efficiency
over time
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an agreement between firms to operate together (individual firms act as a single farm in decision making)
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2 firms control the market
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concentration ratio
the proportion of the market controlled by the largest 'n' firms
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marginal profit
the increase in profit when one more unit is sold
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performance targetting
a goal set by regulator for firms to achieve, proxy competitor, fines
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legal protection of an idea
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economic efficiency
increased output from the same amount of inputs (MC=P)
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predatory pricing
losses made in the short run to force new firms out, shut down price, illegal
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limit pricing
deters new entrants
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monopoly POWER
firm is the price setter
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sales max
selling as much as possible without making a loss
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normal profit
just enough profits to keep resources at current use for limit pricing, to remove competition, gain loyalty
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diseconomies of scale
long run average costs increase
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lack of competition means costs are higher than they would be with competition e.g. satisficing profits, organisational slack, rising average costs of labour (diminishing returns), laziness
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diminishing returns
there is at least 1 factor fixed, MC rises as more of the factor is added e.g. adding more tea leaf pickers in a firm will not add much to output
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Other cards in this set

Card 2


increase the level of competition, prevent anti-competitive behaviour


Role of Competition Comission

Card 3


All costs are variable in the long run


Preview of the back of card 3

Card 4




Preview of the back of card 4

Card 5




Preview of the back of card 5
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