Dynamics of Competition and the Contestable Market (AQA A-Level Economics): Flashcards
📚Flashcards
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Practise the cards
10 cards from this deck
Non-price competition
Non-price competition
Competition via quality, innovation, branding, service, not price
Abnormal profit in perfect competition
Abnormal profit in perfect competition
Profit above normal levels when price exceeds all costs
Break-even price location
Break-even price location
Minimum point of Average Total Cost (ATC) curve
Shutdown price location
Shutdown price location
Minimum point of Average Variable Cost (AVC) curve
Profit maximisation rule
Profit maximisation rule
Produce where MR = MC (Marginal Revenue = Marginal Cost)
Contestable market
Contestable market
Market where new firms can easily enter if profitable
Sunk costs
Sunk costs
Irrecoverable costs incurred when entering a market
Hit-and-run competition
Hit-and-run competition
Temporary market entry to earn profit, then quick exit
Perfectly contestable market key features
Perfectly contestable market key features
No barriers to entry/exit and no sunk costs
Contestable market theory emphasis
Contestable market theory emphasis
Potential competition (threat of entry) not actual competition