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AQA Market Structures A level Economics 2024 Exam Questions and Answers
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AQA Market Structures A level Economics 2024 Exam Questions and Answers
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AQA Market Structures A levelEconomics 2024
Exam Questions and Answers
perfect competition - Answer>> a market structure in which a large
number of firms all produce the same product
Perfectly competitive market Characteristics - Answer>> 1. infinite
number of suppler and consumers
2. each firm is a price taker
3. consumers have perfect information
4. producers have perfect information
5. products are homogeneous
6. Firms are profit maximisers
7. no entry barriers
Allocative efficiency in perfect competition - Answer>> it is
allocatively efficien because firms produceswhere MC=MR, and
here P=MR, so P=MC
Supernormal profits are competed away (perfect competition) -
Answer>> Short term SNP attract new firms to the market - SNP
competed away - firms lower prices - normal profits
short run equilibrium perfectly competitive - Answer>>
long run equilibrium perfect competition - Answer>> other firms
enter the market - no entry barriers
- shift supply curve right
- market price falls until excess profits competed away
, A firm will leave market if unable to make profit in the long run
(Perfect competition) - Answer>> If market price falls below
average unit cost - firm making less than normal profit
- no barriers to exit - leave the market
Productive efficiency in perfect competition - Answer>> firms try to
maximise profits - try to produce where MR = MC - produce at the
bottom of average cost curve
X-inefficiency - Answer>> means that production costs could be
reduced at that level of production
x efficiency - Answer>> measures how successfully a firm keeps
costs down
X inefficiency can be caused by - Answer>> 1. using factors of
production in a wasteful way
2. paying too much for factors of production
No dynamic efficiency in perfect competition - Answer>> Lack of
SNP iii long run - no extra profit to be re invested into the
company for technology, research and development - dynamic
efficiency not achieved
static efficiency - Answer>> if allocative and productive efficiency
are achieved as any particular point in time
Ways Firms could compete (not price) - Answer>> improved
products
better quality service
wide product range
advertising and promotion
nicer packaging
products easy to use
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