MARKETS

Oligopoly

Question 1

Multiple choice - select the correct option

Fixing a price just below the average cost of potential entrants into a market is called:

1. Price discrimination

2. Predatory pricing

3. Cost-plus pricing

4. Limit pricing

5. Break-even pricing

Question 2

If an oligopolist raises price it will:

1. Increase its profits

2. Reduce its profits

3. Expect a big change in its revenue

4. Make entry into the market less likely

5. Make entry into the market more likely

Question 3

There is clear evidence that the UK supermarket sector is increasingly dominated by a few firms, led by Tesco, Sainsbury’s and ASDA.

1. How do supermarkets compete with each other? (6)

2. Explain why UK supermarkets are increasingly dominated by a few large firms. (6)

3. What are the likely effects of this domination on:

   1. Prices (2)

   2. Profits (2)

   3. Efficiency (2)

   4. Economic welfare (2)

4. What could the regulators do to limit the power of supermarkets. (4)

Question 4

Assess price and non-price strategies used by major airlines.

See answer