Study Notes
Business competition involves various market structures like monopoly and oligopoly, each with distinct characteristics and impacts on firms, consumers, and the economy. Firms may remain small due to market size, lack of finance, or the entrepreneur's aims.
- Competition — the rivalry among businesses to attract customers and achieve higher sales. Example: Supermarkets competing on price and quality to attract shoppers.
- Monopoly — a market structure where a single firm dominates the market. Example: A local water supplier with no competition.
- Oligopoly — a market structure dominated by a few large firms. Example: The airline industry where a few airlines control most of the market.
- Economies of Scale — cost advantages that firms obtain due to their size. Example: A large factory producing goods at a lower average cost than a small workshop.
- Barriers to Entry — obstacles that make it difficult for new firms to enter a market. Example: High startup costs in the technology industry.
Exam Tips
Key Definitions to Remember
- Competition
- Monopoly
- Oligopoly
- Economies of Scale
- Barriers to Entry
Common Confusions
- Confusing monopoly with oligopoly
- Misunderstanding the impact of economies of scale
Typical Exam Questions
- What is a monopoly? A market structure where one firm dominates the market.
- How do economies of scale benefit large firms? They reduce average costs, allowing firms to maximize profits.
- What are barriers to entry? Obstacles that prevent new firms from entering a market.
What Examiners Usually Test
- Understanding of different market structures
- Advantages and disadvantages of competition
- Factors influencing the growth of firms