微观经济学outcome1.docVIP

Economic 1: Micro and Macro Theory and Application I. Introduction: II. Body: Q1. The mobile phone market is believed to be an oligopoly- what are two characteristics of this market structure? Oligopoly means that there are only a few sellers of a particular commodity. There are quite a number of oligopolies in the UK. E.g. banking, supermarkets, detergent production etc. Characteristics ： 1．High degree of industrial concentrations 2．Goods or services may be very similar Q2 Illustrate with an appropriate diagram and describe the price and output behavior that may be seen in an oligopolistic market structure. An oligopoly can reach the scale economic and down the cost which the market needs. It is a market dominated by a few producers, each of which has control over the market. It is an industry where there is a high level of market concentration. Assuming that firms are attempting to maintain a high level of profits and their market share it may be the case that: A) The competitors will not follow a price increase by one company. At prices higher than P1 demand is elastic. Rising prices will likely cause loss of market shares. It can also lead to a fall in the total revenue of the firm. B) The competitors prefer to meet a price fall follow other firms to avoid loss of market share. At prices lower than P1 however the fear is that cutting prices will force rivals to follow suit and there will be little gain in the way of additional sales. Cutting prices when demand is inelastic also leads to a fall in total revenue with little or no effect on market share. If so, the relative price change is much smaller and demand would be inelastic in respect of the price change. The kink in the demand curve at price P and output Q means that there is a discontinuity in the firms marginal revenue curve. Q3. Choose another market structure and suggest two characteristic of this market structure Another market structure is Perfect Competition. Pe