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A level Year 2 Microeconomics

Quiz by CharlieRich16
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Last updated: October 13, 2022
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First submittedDecember 7, 2021
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Average score48.1%
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Hint
Answer
The market share of the largest firms in the industry
Concentration Ratio
Informal agreement - firms monitor one another and copy each others actions (Collusion)
Tacit
Lead to a rise in a firms long-run average costs
Diseconomies of Scale
In perfect competition, when price = AVC
Shutdown point
A formal agreement - when firms agree to fix prices and quantity (illegal in EU, UK and US) (Collusion)
Overt
When an economy is allocating scarce resources to meet society's wants and needs (P=MC) (Eff)
Allocative
A large number of small suppliers, none of which is large enough to dominate the market (MS)
Perfect competition
Fixed cost + Variable cost
Total cost
Secret or illegal cooperation in order to deceive other firms / achieve a common goal
Collusion
When there is a wide-ranging agreement among several firms in a market
Cartel
A large number of small suppliers producing non-homogenous goods so have some price setting power (MS)
Monopolistic Competition
Costs of production which are not recoverable if a firm leaves the market
Sunk Costs
When organisational wastage leads to a loss of efficiency (Eff)
X
A small number of large firms produce most of the output of an industry (MS)
Oligopoly
Hint
Answer
The characteristics of a market which determine the behaviour of firms
Market Structure
In highly contestable markets, firms enter and leave in order to make short term supernormal profits
Hit and Run
Costs that are dependant on output
Variable cost
Total revenue - Total cost
Accounting profit
Total revenue - Total cost - Opportunity cost
Economic profit
Costs that do not change with output
Fixed cost
When AR < AC causing firms to leave the market
Subnormal profit
Focusses on the change in choice and quantity over time; linked with innovation (Eff)
Dynamic
Occurs when a whole industry grows larger and firms benefit from lower long-run average costs (EoS)
External
Unit cost advantages from expanding the scale of production in the long-run
Economies of Scale
How easy it is for new firms to enter an industry/market
Contestability
Producing at the lowest possible cost of production (MC=AC) (Eff)
Productive
Any profit made above normal profit causing new firms to enter the market (AR>AC)
Supernormal profit
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