Market structure

A lower death rate is changing the size of China’s population, which in turn is altering demand for a range of products including table salt. The Chinese Government has recently thought about ending the state salt monopoly. However, an online survey showed that most Chinese people oppose bringing more competition into the market, believing that this would push up the price of salt.

Feb/March 2016

A firm wants to be the only supplier in the market. Which policy is it most likely to use to eliminate competition?

Feb/March 2017

For many years, low-cost airlines have been vying on short-haul routes not only with traditional airlines, but also with rail services and road transport by car. They are now beginning to compete with traditional airlines on long-haul routes as well. Because competition has intensified, some horizontal mergers have taken place among the traditional airlines. By 2030, China is forecast to become the largest domestic air travel market in the world, accounting for 20% of total global air travel. At present, the USA is the leading market, and it is predicted that from 2015 to 2030 the country will order 6160 of the 28000 passenger aircraft that are expected to be produced. India, where airlines are both state-owned and privately owned, is seeing a very large rise in domestic flights and international flights. More airports are being constructed in India, together with extra facilities in and around them. For instance, more taxi firms are being established to transport passengers to and from airports. The fast growth of air travel in India and in other countries is affecting the labour market for pilots, as shown in Fig. 1. Fig. 1 The market for pilots. The vertical axis is labelled "price of pilots" and the horizontal axis is labelled "quantity / number of pilots". The origin is labelled "O". Two equilibrium prices are shown, labelled $P_1$ and $P_2$. Two quantities are shown, labelled $Q_1$ and $Q_2$. A supply curve labelled "S" slopes upwards from left to right. Two demand curves are shown, labelled $D_1$ and $D_2$, both sloping downwards from left to right. $D_2$ is to the right of $D_1$. The speed at which the Indian air travel market expands will depend on several influences. These include how far business travel grows and the pace at which demand for overseas holidays rises. Demand for these types of air travel has, in turn, been affected by price changes. The price elasticity of demand for air travel has been estimated at $-1.2$. One factor affecting prices, and therefore the inflation rate, is changes in taxation.

Feb/March 2017

Which statement accounts for why firms under perfect competition cannot exploit consumers?

Feb/March 2018

A company that operates a chain of restaurants acquired a different restaurant chain. What type of purchase is this most likely to be classified as?

Feb/March 2018

South Africa has over 700 state-owned enterprises, and some of them have carried out vertical integration and horizontal integration. A few of these state-owned enterprises are monopolies, such as a railway monopoly. A prominent South African economist has suggested that a larger share of the country’s resources should be used to construct and operate new railway lines and stations.

Feb/March 2018

The mobile (cell) phone industry in Asia is expanding and employing more workers. In March 2017, two mobile phone producers merged, and both firms had relatively high fixed costs. The merger produced one of the largest mobile phone firms and pushed the Asian market further away from perfect competition and nearer to monopoly. It was anticipated that industry profits would rise because of the merger.

Feb/March 2019

In certain industries, one monopoly determines output and prices. What effect is this most likely to have on consumers?

Feb/March 2020

One mining company acquired a different mining company. What kind of integration would this be described as?

Feb/March 2020

Throughout 2017, the Brazilian paper industry was flourishing. Its total revenue went up, and it employed a larger quantity of better-quality factors of production. By the end of 2017, Brazil’s biggest paper producer merged with an Indonesian paper-making company. The pattern in Brazil’s coffee industry was not the same as that of paper. Brazilian coffee saw demand drop and total revenue decline.

Feb/March 2020

What is likely to happen in a conglomerate merger?

Feb/March 2021

Which features are present in a monopoly?

Feb/March 2023

A monopoly firm can often make higher profits than a firm operating in a competitive market. Which monopoly characteristic is most likely to lead to this?

Feb/March 2024

During 2013, a German medicines manufacturer acquired a UK company that operated a chain of pharmacies selling medicines. Which term most accurately describes this takeover?

May/June 2015

What can arise in monopoly that does not exist in perfect competition?

May/June 2015

Which of the following is not normally linked to the presence of a monopoly?

May/June 2015

Which feature is shared by a firm under perfect competition and a monopoly?

May/June 2016

Two firms agree to combine their activities. What has to follow?

May/June 2016

What is correct when comparing a monopoly with a perfectly competitive firm?

May/June 2016

Car production is undergoing change. Up to recently, car manufacturing firms held the most market power. At present, however, firms making car parts are becoming more powerful. The markets for cars and for car parts both contain a fairly large number of firms ranging from very large to small. In 2014, the market was dominated by sixteen major car firms, with each selling more than one million cars a year. In that same year there were ten major car part firms, and these were increasing their influence over the car producers. The world's largest car part supplier by revenue says that it supplies at least one part in every car sold worldwide. The firm has expanded through mergers and is moving towards complete market control. It is aiming to build strong barriers to entry and to become the only producer. The ten largest car part firms made up 63% of total car part output in 2013, producing US$250 billion of car parts in that year. These ten firms now have the capacity to build 85% of a car's internal systems, leaving car manufacturing firms to do little more than make the engine. Car production is rising in several developing countries but falling in some developed countries. Car manufacturing increased in the UK between 2013 and 2014, although the industry had already been facing problems before 2013. In 2008 the average wage of car workers dropped. In that year the UK experienced a recession. Real wages in the UK car industry for the lowest paid workers also fell after 2008, and employment fell between 2008 and 2012. This was despite output per worker rising, partly because some less skilled workers lost their jobs and the industry replaced some of these workers with capital equipment. Car buyers often borrow money from commercial banks to pay for their purchases. In some cases buyers use their savings, which may be taken out of commercial banks, to buy cars. The conduct and performance of car firms are shaped by the economic system of the country where they operate. In countries with a market system, consumer sovereignty is likely to be greater. Car firms in such countries may be more inclined to innovate, bringing in new methods of production and developing higher-quality products.

May/June 2016

Tuk-tuks, which are three-wheeled motorised rickshaws, are used in several countries. India is the biggest producer of this vehicle. The largest tuk-tuk producer in India competes with domestic firms and with imported tuk-tuks. The industry is becoming more capital-intensive and more competitive, although it remains far from perfect competition.

May/June 2016

A monopoly comes to dominate an industry and replaces competitive firms. Which statement is unlikely to be true for a monopoly when it is compared with a competitive firm?

May/June 2017

A monopoly replaces competitive firms in an industry. Which statement is not likely to be true of a monopoly compared with a competitive firm?

May/June 2017

A monopoly replaces competitive firms in an industry. Which statement is least likely to be true for a monopoly when compared with a competitive firm?

May/June 2017

2015 recorded mergers worldwide worth more than US$4000 billion, with many taking place in the USA and the UK. Some mergers happen between firms based in different countries. These are shaped by several influences, including the size and structure of the markets in the countries concerned and their exchange rates. Mergers affect the degree of competition in markets.

May/June 2017

Which feature may be found in both a monopoly and perfect competition?

May/June 2018

Which situation in the building industry would be most likely to be examined by a government agency established to regulate restrictive practices?

May/June 2018

Which feature is typical of a firm operating under perfect competition?

May/June 2018

Which situation in the building industry is most likely to be looked into by a government body established to regulate restrictive practices?

May/June 2018

Which feature is typical of perfect competition?

May/June 2018

Which building industry situation is most likely to be examined by a government body established to regulate restrictive practices?

May/June 2018

Morocco’s banking sector has been described as one of Africa’s strongest. It contains some of the continent’s biggest commercial banks, yet three of the nineteen hold over two-thirds of the market between them. Most of the expansion of these three banks has come through mergers, and further mergers among Moroccan banks are expected in the future. The banks use brand names, decide their own interest rates on loans and offer some different services. The larger banks usually lend to big firms. Small and medium-sized firms find it harder to obtain loans. More than 60% of the population now use commercial banks’ services. The share of families opening savings accounts with commercial banks is rising. Moroccan banks now operate branches in 22 African countries and in several European countries as well. They are also growing within Morocco, which is creating more jobs. Morocco has a fairly high unemployment rate. Fig. 1 shows the unemployment rate in 2015 for a selection of African countries, including Benin, which is a relatively poor country. Benin has a large labour-intensive, subsistence farming sector. Fig. 1 also shows youth unemployment and population growth. Unemployment rates differ across groups. Youth unemployment is often twice the overall unemployment rate. Fig. 1 The unemployment rate, youth unemployment rate and population growth rate in selected African countries in 2015. The vertical axis is labelled “rate (%)”. The horizontal axis lists the countries: Benin, Egypt, Morocco, Nigeria and Uganda. The legend shows three bars for each country: Unemployment rate; Youth unemployment rate; Population growth rate. In Morocco, population growth is faster than the rate at which new jobs are being created. The increase in unemployment is affecting wage rates in the country. As with unemployment, wage rates are not the same for all groups. For instance, older workers are usually paid more than younger workers.

May/June 2018

In the UK, bus trips outside London have declined by almost 40% since 1980. The drop in demand has mainly been caused by higher bus fares, rising incomes and shifts in the price and quality of substitutes. On some routes there are monopolies in operation, and this absence of competition can drive up the price.

May/June 2018

A large bakery purchases a flour mill. What form of integration is this?

May/June 2019

Why do very large firms dominate the energy supply industry in many economies?

May/June 2019

The car market and the tyre market are tightly connected. The five biggest tyre companies once accounted for 66% of all tyres. When more than 250 Chinese firms entered, the combined global share of the top five firms fell to below 50%. That also altered the price elasticity of demand (PED) for the tyres sold by individual firms. Some of these firms are state-owned enterprises, while others belong to the private sector.

May/June 2019

In which market is competition likely to be strongest?

May/June 2021

What is one benefit of competitive markets?

May/June 2021

A company in the private sector is the sole provider of rail services linking two cities. What would prevent the company from setting very high ticket prices?

May/June 2021

Which row identifies an essential characteristic of competitive markets and monopoly markets?

May/June 2022

What factors might result in high profits in a monopoly market?

May/June 2022

What is one result of a competitive market?

May/June 2022

Which market conditions are most likely to encourage small firms to enter a market?

May/June 2023

A clothing manufacturer grows by acquiring a clothing retailer. What type of merger is this?

May/June 2024

What is likely to occur if a market that was once competitive turns into a monopoly?

May/June 2024

What characteristics does a highly competitive market have when it is compared with a monopoly market?

May/June 2024

During 2020, spending on vaccine production was extremely high. A proposal existed for a large vaccine producer to horizontally merge with another firm, yet the proposal was dropped. That was unsurprising because a similar merger between two firms in the same industry had collapsed the year before. Even so, most firms in this industry are still achieving their targets and also generating many external benefits for the wider economy.

May/June 2024

If a highly competitive market changes into a monopoly, what is likely to rise and what is likely to fall?

May/June 2025

A market shifts from intense competition into a monopoly. What is likely to happen to output and price in this market?

May/June 2025

In 2022, Paraguay’s production possibility curve (PPC) moved to the right. Paraguay operates a mixed economic system. Its government supplies merit goods and public goods. The country’s private sector is a major producer of shampoo. Firms in the shampoo industry use division of labour. There are several firms in the industry, but their number is falling. It may soon be the case that only one firm remains in the industry.

May/June 2025

A market moves from perfect competition to monopoly. What is likely to happen to output and price in this market?

Oct/Nov 2015

A small number of multinational companies dominate the world’s open-cast mining of mineral ores, and they use comparatively few workers. What does this show?

Oct/Nov 2015

What features are present in a monopoly?

Oct/Nov 2015

In certain countries, previously nationalised utilities, such as electricity, have been replaced by a number of public limited companies. Which change has taken place in the electricity market?

Oct/Nov 2015

In 2007, a large industrial mining company tried to take over another industrial mining company. This attempt was unsuccessful. In 2010, the same mining company put forward an offer to acquire a company that sells potash, which is used to improve agricultural soils. How can the mining company’s efforts to acquire these other companies be described?

Oct/Nov 2015

The average income in Mexico is increasing, yet many people in the country are still poor. Carlos Slim is a Mexican entrepreneur and one of the richest men in the world. His companies dominate the mobile (cell) phone and landline phone markets in the country and employ a large number of specialised workers. However, the Mexican Government is trying to increase competition in the communications market.

Oct/Nov 2015

Why does a firm in perfect competition act as a price taker?

Oct/Nov 2016

Which of the following is least likely in an industry made up of many small firms?

Oct/Nov 2017

In 2015, the worldwide equilibrium price of milk decreased. As a result, the number of farms making milk fell. To cut costs, farms became larger and hired fewer but more specialised workers. Because there were fewer farms, competition became weaker, as some large farms gained monopoly power in local areas. Some farm workers moved into other jobs, while others who stayed agreed to lower pay.

Oct/Nov 2017

Qatar has a developing economy and has gained from the expansion of the insurance industry. At present, this industry is dominated by a single firm and remains far from perfect competition. The economy has also seen an overall rise in labour productivity. However, economists disagree about the exact link between free trade and economic growth.

Oct/Nov 2017

In Saudi Arabia, cement output has increased because the construction industry has demanded more cement for houses, schools, hospitals and roads. Cement prices, export bans and mergers between cement firms are also influencing the market.

Oct/Nov 2017

Which international market comes nearest to the model of perfect competition?

Oct/Nov 2018

Which statement is correct for firms in perfect competition?

Oct/Nov 2018

A film production company buys a chain of cinemas. What is this an example of?

Oct/Nov 2018

The table presents the features of a market. What characteristics does a perfectly competitive market have?

Oct/Nov 2018

What feature is typical of a monopoly market structure?

Oct/Nov 2019

Which set of characteristics accurately describes a monopoly?

Oct/Nov 2019

In 2015, a major UK company tried to take over a rival US medical company in order to become the world’s leading supplier. Both companies were involved in the manufacture of medicines used to treat rare diseases. Which term would be used to describe the acquisition if it had been successful?

Oct/Nov 2019

In 2017, two companies in China's chemical sector merged. This produced the world's largest chemical group, with revenue of roughly US$100 billion. The chief purpose of this merger was to dominate the domestic chemicals and fertilisers market by setting up a monopoly. The resulting business is a multinational company (MNC) because it also manufactures in other countries, including Italy and Switzerland.

Oct/Nov 2019

Compared with markets for manufactured goods and services, agricultural markets are nearer to perfect competition. The aims of business organisations can differ from one market to another, and also within the same market. In 2017, the Nigerian government used supply-side policy measures to affect the aims and performance of firms in a variety of markets and to reduce firms’ average production costs.

Oct/Nov 2019

Firm X supplies bricks and chooses to merge with firm Y, which also supplies bricks. Which type of merger has occurred?

Oct/Nov 2020

Which combination is normally found in a monopoly?

Oct/Nov 2020

What is one key benefit of a horizontal merger when compared with a conglomerate merger?

Oct/Nov 2021

Two car manufacturers decide to merge. Which result would count as a disadvantage for customers?

Oct/Nov 2021

Industries and markets in Vietnam are undergoing change. Division of labour is being used more widely across a range of industries. As competition rises in many markets, some firms are now making losses. In 2018, manufacturing was Vietnam’s strongest sector, and manufacturing output rose by 13%.

Oct/Nov 2021

Two large firms engaged in chemical manufacturing want to merge. Why could the government choose to block the merger?

Oct/Nov 2022

A number of firms have social welfare as their chief objective. Across the world, the number of such firms is rising. Consumers are also beginning to alter their spending habits by shifting towards environmentally friendly products such as solar energy. Firms that damage the environment are now less able to earn profits, and some of these firms have to merge if they are to survive.

Oct/Nov 2022

Read the source material thoroughly before you answer Question 1. Source material on bank mergers In 2019, three Nigerian commercial banks merged to create Nigeria’s largest commercial bank. Also in 2019, two US commercial banks combined to form the US’s 6th largest commercial bank. In the US, the three biggest banks held 32% of the market. In both the US and Nigeria, larger banks responded by opening more branches, running advertising campaigns and improving online banking. Bank mergers can lead to some bank employees being made redundant. Unemployment did rise in Nigeria in 2019. This was likely to have had an effect on the government’s budget because both government tax revenue and government spending would have changed. Most commercial bank workers are highly educated. The number of years people spend in education can influence a country’s birth rate. Fig. 1.1 displays average years of schooling and the birth rate in selected countries in 2019. Fig. 1.1 Average years of schooling and birth rate in selected countries 2019. The vertical axis is labelled Average years of schooling and goes from 0 to 16. The horizontal axis is labelled Birth rate and goes from 0 to 50. The plotted points are labelled as follows: Germany (about 10 on birth rate and about 15 average years of schooling), US (about 12 on birth rate and about 14 average years of schooling), Argentina (about 18 on birth rate and about 11 average years of schooling), Eritrea (about 27 on birth rate and about 4 average years of schooling), Nigeria (about 32 on birth rate and about 6 average years of schooling), and Chad (about 42 on birth rate and about 3 average years of schooling). Some households in both Nigeria and the US, where spending is greater than income, borrow from commercial banks. In Nigeria, some children in low-income households do not get enough food because food prices are high. A government subsidy to farmers could be used to support low-income Nigerian households. The subsidy could also help to reduce the deficit on the current account of its balance of payments. Whether this happens will depend on Nigeria’s inflation rate compared with other countries and on incomes at home and overseas. In the US, nearly 35% of children are overweight. One reason is the consumption of foods and drinks that contain a lot of sugar. The US government could set a minimum price on these products, including chocolate. A minimum price could move the market nearer to the point where social benefit equals social cost. However, some consumers think this would be unfair and some firms think it would cut profits. A minimum price may also create a cost for the government, and how successful it is would depend on how high the minimum price is fixed.

Oct/Nov 2022

A large privately owned firm is the only provider of electricity in a city. Which pair of characteristics is likely to apply to this firm?

Oct/Nov 2023

In which kind of industry is a firm most likely to earn a high profit in both the short run and the long run?

Oct/Nov 2023

In some countries, monopoly markets are permitted to operate. What is one reason for this?

Oct/Nov 2023

A multinational fast-food company acquired a food-ordering website so that its customers could download menus and make payments ahead of time. Which term is the most suitable description of this merger?

Oct/Nov 2024

An industry that is competitive turns into a monopoly. What is the most likely benefit for consumers?

Oct/Nov 2024

What is likely to exist when an industry contains many small firms?

Oct/Nov 2025

What factors would make the presence of a monopoly market more likely?

Oct/Nov 2025