Market structure

What can be present in monopoly but not in perfect competition?

May/June 2015

What feature is shared by a firm in perfect competition and a monopoly?

May/June 2016

Car production is changing. Until quite recently, car manufacturing firms had the strongest market power. At the moment, though, firms making car parts are becoming more powerful. The markets for both cars and car parts include a relatively large number of firms ranging from very large to small. In 2014 the market was led by sixteen major car firms, each of which sold more than one million cars a year. In that same year there were ten major car part firms and these were gaining more power 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 across the world. The firm has expanded through mergers and is moving towards full control of the market. It is trying to build high barriers to entry and 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 the car manufacturing firms to make little more than the engine. Car production is rising in a number of developing countries but falling in some developed countries. Car manufacturing increased in the UK between 2013 and 2014, but the industry had already been facing problems before 2013. In 2008 the average wage of car workers fell. In that year the UK was in recession. Real wages in the UK car industry for the lowest paid workers also declined after 2008 and the number of workers employed fell between 2008 and 2012. This was despite output per worker increasing, 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 behaviour and performance of car firms are affected by the economic system of the country in which they produce. In countries with a market system there is likely to be greater consumer sovereignty. Car firms in such countries may be more likely to innovate, introducing 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. India’s largest tuk-tuk manufacturer competes with domestic firms and with imported tuk-tuks. The industry is becoming more capital-intensive and more competitive, although it is still not close to perfect competition.

May/June 2016

To carry out horizontal integration, a tyre-manufacturing firm could merge with another firm that makes

May/June 2017

A monopoly comes to control an industry that was previously served by competitive firms. What would not usually be true of a monopoly when compared with a competitive firm?

May/June 2017

To obtain horizontal integration, a company making tyres could merge with another company producing

May/June 2017

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

May/June 2017

Which characteristic may be present in both monopoly and perfect competition?

May/June 2018

Which feature is typical of a perfectly competitive firm?

May/June 2018

Morocco’s banking sector has been described as among the strongest in Africa. It contains some of Africa’s biggest commercial banks, yet 3 out of 19 of them dominate over two-thirds of the market. These 3 have expanded mainly by merging, and more mergers among Moroccan banks are likely in future. Banks trade under brand names, choose their own loan interest rates and offer some different services. The biggest banks usually provide loans to large firms. Small and medium sized firms find borrowing harder. More than 60% of the population now use commercial bank services. The share of families opening savings accounts with commercial banks is rising. Moroccan banks now operate branches in 22 African countries and also in several European countries. They are expanding within Morocco too, which is creating more jobs. Morocco has a comparatively high unemployment rate. Fig. 1 shows the unemployment rate in 2015 for several African countries, including Benin, which is relatively poor. Benin has a large labour-intensive, subsistence farming sector. Fig. 1 also includes youth unemployment and population growth. Unemployment levels differ across groups. Youth unemployment is often twice the overall unemployment rate. In Morocco, population is growing faster than new jobs are being created. The increasing unemployment rate is influencing wage rates in the country. As with unemployment, wage rates differ across groups. Older workers, for example, usually receive higher pay than younger workers.

May/June 2018

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

May/June 2019

The car and tyre markets are closely linked. The five biggest tyre companies once produced 66% of all tyres. Since more than 250 Chinese firms entered, the combined global share of the top five has fallen to below 50%. This has also altered the price elasticity of demand (PED) for tyres sold by individual firms. Some of these businesses are state-owned enterprises and others belong to the private sector.

May/June 2019

Which market is likely to be the most competitive one?

May/June 2021

What is one benefit of competitive markets?

May/June 2021

A Swedish furniture manufacturer acquired a Romanian company that possessed 8300 hectares of woodland. What type of merger is this most likely to be?

May/June 2021

A private sector firm is the sole provider of rail services between two cities. What would prevent the firm 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 could make profits high in a monopoly market?

May/June 2022

Which conditions are most likely to draw small firms into entering a market?

May/June 2023

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

May/June 2024

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

May/June 2024

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

May/June 2024

Healthcare belongs in the tertiary sector. Healthcare generates both private benefits and external benefits. In 2019, five mergers took place between large US healthcare firms. Alongside their operations in the US, US healthcare firms also operate in several host countries, including Singapore.

May/June 2024

If a market with very strong competition turns into a monopoly, what is likely to rise and what is likely to fall?

May/June 2025

What characteristics are associated with a monopoly?

Oct/Nov 2015

In some countries, utilities that were previously nationalised, 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

Indonesia’s biggest aviation company is a state-owned corporation that began manufacturing in 1976. It makes intensive use of capital goods and holds a monopoly over aircraft production in Indonesia. Although it has long produced components for overseas firms, it is now attempting to market aircraft to other countries. As a result, it must compete in a market where most firms are public limited companies.

Oct/Nov 2016

Which statement is correct for firms operating in perfect competition?

Oct/Nov 2018

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

Oct/Nov 2018

Which pair of features accurately describes a monopoly? obstacles to entry; economies of scale

Oct/Nov 2019

During 2015, a major UK firm tried to buy a competing US medical firm so that it could become the world’s top supplier. The two firms both focused on producing medicines used to treat rare diseases. Which term would be used to describe the acquisition if it had succeeded?

Oct/Nov 2019

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

Oct/Nov 2020

Which combination is normally present in a monopoly?

Oct/Nov 2020

Two car manufacturers agree to merge. Which result would be a drawback for customers?

Oct/Nov 2021

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

Oct/Nov 2021

Vietnam’s industries and markets are undergoing change. Division of labour is being used more widely across a number of industries. A growing number of markets are becoming more competitive, which is causing some firms to record losses. In 2018, manufacturing was Vietnam’s strongest sector, and manufacturing output rose by 13%.

Oct/Nov 2021

Read the source material with care before you answer Question 1. Source material: Bank mergers During 2019, a merger involving three Nigerian commercial banks created 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, the major banks responded by opening additional branches, running advertising campaigns and upgrading online banking. Bank mergers can mean that some bank employees lose their jobs. Unemployment did rise in Nigeria in 2019. This is likely to have influenced the government’s budget because both government tax revenue and government spending would have changed. Most commercial bank workers are well educated. The number of years of education people receive can influence a country’s birth rate. Fig. 1.1 shows average years of schooling and the birth rate in selected countries in 2019. In both Nigeria and the US, some households spend more than they earn, so they borrow from commercial banks. In Nigeria, some children in low-income households do not get enough to eat because food is expensive. A government subsidy for farmers could be used to help 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, almost 35% of children are overweight. One cause of this is eating and drinking items with a high sugar content. The US government could set a minimum price for such products, including chocolate. A minimum price could move the market closer to the point where social benefit equals social cost. However, some consumers think it 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 set.

Oct/Nov 2022

In what type of industry is a firm most likely to earn a large profit in both the short run and the long run?

Oct/Nov 2023

A multinational fast-food company purchased a food-ordering website so that the multinational’s customers could download menus and pay in advance. Which term most accurately describes this merger?

Oct/Nov 2024

A competitive market turns into a monopoly. What is the most likely benefit for consumers?

Oct/Nov 2024

What is likely to be observed when an industry has many small firms?

Oct/Nov 2025

Which factors would make a monopoly market more likely to exist?

Oct/Nov 2025