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Firm aims:1.      Profit max

2.    Market domination (sales max

3.    Corporate growth (by expanding, diversifying and take-overs)

4.    Satisfying profits


Perfect competition (agriculture, stock exchange)

Organisation is a price taker.

1.    A large no. of buyers and sellers.

2.    Consumers aim to maximise satisfaction.

3.    Producers aim to maximise profits.

4.    All firms sell a homogeneous product.

5.    There is a perfect knowledge.

6.    All the factors of production are perfectly mobile.

7.    There is free entry to and exit from all markets.



Monopolistic competition (clothing and furniture).

Many producers and product differentiation. Frequent entry and exit.


Oligopoly (Cars)

Few sellers, product differentiation. Barriers to entry.


Monopoly (sugar (Tate and Lyle), electrical car components)

One seller (>25%). No close substitutes + barriers.

Adv-1.      Flat bottomed AC (ec. of scale, cars)

2.    Research and development

Disadv-1.   Redistribution of income

2.    Allocative inefficiency (misallocation)

3.    Lack of X-efficiency (minim. of costs)

Types:1.    Natural (South-Africa-diamonds)

2.    Historical (firm was first, Lloyds-insurance

3.    Capital size (if much needed, chemical industry)

4.    Technological (many economies of scale, cars)

5.    Legal (patents, new ideas)

6.    Public (post offices)

7.    Contrived (arranged, legislation against-Prohibition Take-over Regulation) RPM illegal by Office of Fair Trading. EC have the restrictions on trade practices by Treaty of Rome. Policy is to make AC=AR.

 Price discr:Geographical,Branding,Time,Dumping




{info author|Keith Siilats}, {DATE|05/11/95}, Subject: {info subject|Economics}, Words: {info numwords|200}





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