https://padlet.com/madeline_alexis98/xfa1kwwznx8k en-us 2017-07-16 09:47:59 UTC 2026-01-10 05:45:00 UTC hello@padlet.com madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783486 'Market dominance is the main factor determining the profitability of firms.' 
(a) Explain how market dominance can influence a firm's price and output decisions. [10]
(b) Discuss whether government intervention is always needed when a firm dominates the market. [15] ]]> 2017-07-16 09:49:39 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783486 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783499 2017-07-16 09:50:17 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783499 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783536 2017-07-16 09:51:47 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783536 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783572 Define 'market dominance'
Market dominance occurs when markets in which one or few sellers are able to restrict the quantity supplied of a good to maximise profits since the market of goods are only sold by one or few sellers who possess extensive market power in the industry.
Causal relationship between characteristics of markets with extensive market power and their price and output decisions
Firm's 'price and output decisions'
Profit-maximisation when Marginal Cost (MC) = Marginal Revenue (MR) ]]> 2017-07-16 09:53:25 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178783572 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784221 1. Single Seller 
As the monopolist is the single seller in the market, it has the ability to affect both price and output, therefore being the PRICE-SETTER. 
2. Unique Product 
Since there is no substitute for the product, the consumers either pay the price set for the good or go without it. The price elasticity is very low for these products therefore. 
3. Imperfect Knowledge of Product 
Only the monopolist is fully aware of the costs and production of the product therefore it can keep out potential competitors and make the consumers pay whatever price they set. 
4. High barriers to entry 
Barriers of entry can take the form of high set-up costs etc, which will prevent new firms from entering due to the lack of resources. ]]> 2017-07-16 10:13:18 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784221 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784427 1. The ability to control the market will allow it to produce at LRMC = MC to retain the supernormal profits. It can also allow the monopolist to practise price discrimination to further increase their profits. The extensive market power also allows the monopolist to restrict the output below the socially efficient level where P > MC to charge a higher price and produce at lower output.
2. The lack of substitute for its product makes the product very price inelastic in demand which will allow the monopolist to raise the price of the good with a less than proportionate fall in output. Therefore the market dominance can allow the firm to charge a higher price without fearing of losing many of its consumers. 
3. It's perfect knowledge allows it to own the information about the most efficient techniques and cheapest suppliers for its product. This will allow it to produce at the lowest cost, reducing the price of the good and consumers benefit from the lower prices.
4. The high barriers of entry can allow the monopolist to retain supernormal profits as it is not forced to operate at the bottom of AC like a perfectly competitive firm, making the long run price higher and output lower. ]]> 2017-07-16 10:23:19 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784427 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784729 1. Few dominant firms 
The few dominant firms usually account for a significant proportion of the output of the industry where each firm has significant market share. 
2. High barriers to entry 
Similar to monopoly*
3. Mutual inter-dependency of firms 
Any dominant firm will have to consider the reactions of the other rival firms if they want to make an output or price decision. 

]]> 2017-07-16 10:38:07 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784729 madeline_alexis98 https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784884 Market dominance in oligopoly is different from that in monopoly.
1. Mutual inter-dependency within an oligopoly will result in 2 models for its price and output decisions - cooperative & competitive. Since the lowering of price will lead to a more than proportionate fall in profits as the firms are very responsive, the collusion will allow the oligopoly to take after the form of a monopoly and jointly maximise their profits. They can then charge a higher price and restrict output like the monopoly to retain supernormal profits. However in the competitive model, the mutual inter-dependency will result in price rigidity and restrict the price decisions of the firms as rival firms will match the price cut to increase revenue, resulting in a price war instead. This makes the firms in oligopoly market reluctant to lower their prices or change their outputs, resulting in relatively stable prices across the market. ]]> 2017-07-16 10:43:58 UTC https://padlet.com/madeline_alexis98/xfa1kwwznx8k/wish/178784884