Markets

Question 1

What is competition?

Answer 1

Competition is rivalry amongst sellers

Question 2

What is a market?

Answer 2

A market is a place where buyers and seller come together to agree on a price

Question 3

What is market price?

Answer 3

It is a price range in a market which consumers are willing and able to pay for a product

Question 4

What is markup?

Answer 4

It is the difference between the cost of producing a product and the price it is sold for

Question 5

What is a competitive market?

Answer 5

A market where there is a large volume of sellers

Question 6

What are the features of a competitive market

Answer 6

There is a large number of sellers with typically low prices

Question 7

What is a monopoly?

Answer 7

A market dominated by one seller

Question 8

What are the features of a monopoly?

Answer 8

There are few firms with often high prices

Question 9

What are economies of scale?

Answer 9

They arise when unit cost falls as output rises

Question 10

What are the aims of a business?

Answer 10

PIGSS

Profit, Increase market share, Growth, Survival, Services

Question 11

Why might monopolies have low prices?

Answer 11

This is so they can price competitors out of the market so they can maintain market share

Question 12

What is the market share required to hold a monopoly

Answer 12

A 25% market share

Question 13

What is an oligopoly?

Answer 13

A market dominated by a few sellers

Question 14

What are the features of an oligopoly?

Answer 14

The products and prices are similar (prices often high)

Businesses might compete on non-price differences

Question 15

What might happen between firms in an oligopoly?

Answer 15

Collusion and anti-competitive behavior

Question 16

What are the results of anti-competitive behavior?

Answer 16

It prevents fair competition

Question 17

What is monopolistic competition?

Answer 17

A market with many firms competing not on price but on additional offers, often with low prices

Question 18

What is market size?

Answer 18

The number of potential buyers in a market and is expressed as the total values of goods sold

Question 19

What is market growth?

Answer 19

The percentage growth in the size of the market, over a given time period

Question 20

What is market dominance?

Answer 20

A measure of the market share to its competitors

Question 21

What is market power?

Answer 21

The ability of a firm to influence or control the terms and conditions on which goods are bought and sold

Question 22

What is market share?

Answer 22

It is the percent of total sales that a business has in a specified market

Question 23

What are the 6 strategies to increase market share?

Answer 23

1. Be aware of customer needs and meet them
2. Sell more to existing customers
3. Find out why old customers left
4. Have a clear marketing plan
5. Use a variety of marketing techniques
6. Merge with another company

Question 24

What is organic (internal) growth?

Answer 24

It is when a business increases in size just by selling more products

Question 25

How can external growth be achieved?

Answer 25

Through mergers and acquisitions

Question 26

What are barriers to entry?

Answer 26

A barrier to entry is a factor that could prevent a firm entering and competing in a market

Question 27

What are some examples of barriers to entry?

Answer 27

``` Large start-up cost Having the marketing budget to break customer loyalty Inability to gain economies of scale Existing businesses starting a price war Legal restrictions, patents ```

Question 28

What is a barrier to exit?

Answer 28

A factor which could prevent a firm from leaving a market even if it wanted to

Question 29

What are some examples of barriers to exit?

Answer 29

Difficulty selling off capital High redundancy cost Contracts with suppliers

Question 30

What is a merger?

Answer 30

When two companies join together to form a larger firm

Question 31

What is an acquisition?

Answer 31

This is where the control of another company is achieved by buying a majority of its shares

Question 32

What are some disadvantages of mergers and acquisitions?

Answer 32

``` Redundancies due to duplicated roles Lack of company knowledge Break down in communications Diseconomies of scale Can increase risk if entering a new market ```

Question 33

What does the CMA investigate?

Answer 33

Dominance and anti-competitive behavior

Question 34

What are the responsibilities of the CMA?

Answer 34

Investigate dominate positions Investigate mergers Completing market studies Bringing criminal proceedings against individuals

Question 35

What sanctions can the CMA enforce?

Answer 35

Business fined up to 10% of global turnover Sue for damages Individuals disqualified from being a company director Fine individuals if they fail to comply