What are the four characteristics of a monopolistically competitive market?
1. There are a large number of buyers and sellers in the market 2. There are no barriers to entry or exit 3. Firms are short run profit maximisers 4. Firms produce non-identical goods
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Where is the AC curve in a monopolistic competition?
Tangental to the AR curve in line with MC=MR
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What conditions must be met in the long run in a monopolistic competition?
MC=MR (profit maximer) AC=AR (normal profits)
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What happens if there is abnormal profits being made in a MC firm?
New firms will enter the market and supply will shift out, AR falls.
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What are three characteristics on a oligopoly?
1. Few firms in the market 2. Interdependent on one another 3. Low barriers to entry and exit
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How to firms in an oligolpoly compete?
Non price factors
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What are the 4 p's of the marketing mix?
Product, price, promotion, place
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In which market is price described as 'rigid'?
Oligopoly
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What is collusion?
When firms make agreements to restrict competition to maximise their own benefits
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What is a colluding oligopoly called?
A cartel
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What is the difference between overt and covert collusion?
Overt is formal and known, covert is hidden and non written agreement (tacit collusion)
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What conditions must apply for a cartel to function?
1. Agreement must be reached (likely in mature market) 2.Cheating must be prevented 3. Potential competition restricted
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Example of a cartel
OPEC
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Which market is there a kinked demand curve?
Oligopoly
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Other cards in this set
Card 2
Front
Where is the AC curve in a monopolistic competition?
Back
Tangental to the AR curve in line with MC=MR
Card 3
Front
What conditions must be met in the long run in a monopolistic competition?
Back
Card 4
Front
What happens if there is abnormal profits being made in a MC firm?
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