What students need to learn:
Content
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Students should be able to:
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Additional Guidance Notes
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Perfect competition
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Understand the assumptions of perfect competition and be able to
explain the behaviour of firms in this market structure.
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Diagrammatic analysis of the market structure is required in both the
short and long run. Students will be expected to understand the significance
of firms as price-takers in perfectly competitive markets. An understanding
of the meaning of shut-down point is required. The impact of entry into and
exit from the industry should be considered.
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Monopoly
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Understand the characteristics of this model and be able to use them to
explain the behaviour of firms in this market structure.
Explain and evaluate the differences in efficiency between perfect
competition and monopoly.
Explain and evaluate the potential costs and benefits of monopoly to
both firms and consumers, including the conditions necessary for price
discrimination to take place.
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Diagrammatic analysis of the market structure is required. Students
must be able to explain the sources of monopoly power such as the degree of
product differentiation and entry barriers.
A diagrammatic explanation to compare the two market structures is
expected.
Diagrams should also be used to support the understanding of price
discrimination.
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Monopsony
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Explain and evaluate the characteristics and necessary conditions for
a monopsony to operate. Evaluate the potential costs and benefits of a
monopsony to both firms and consumers.
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Students should be aware of the significance of monopsony power for
businesses operating in a particular market for example, the impact of supermarket
monopsony power on suppliers.
Students are not expected to use diagrams to explain monopsony.
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Oligopoly
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Understand the characteristics of this market structure with particular
reference to the interdependence of firms. Be able to explain the behaviour
of firms in this market structure.
Explain the reasons for collusive and non-collusive behaviour.
Evaluate the reasons why firms may wish to pursue both overt and
tacit collusion.
Use simple game theory to illustrate the interdependence that exists
in oligopolistic markets.
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Students should be able to explain that oligopolistic markets have
high concentration ratios, in which a firm’s decisions on price, output and other
competitive activities may have immediate effects upon other competitors.
Students should understand the reasons for cartels, non-price
competition, price wars, predatory pricing and price leadership. Diagrammatic
analysis of this area is not required.
Students will be expected to have an understanding of prisoners’
dilemma and a simple two firm/two outcome model. Students should analyse the advantages/disadvantages
of being a first mover. Students will not be expected to have an
understanding of the Nash Equilibrium. The Kinked Demand curve is not required
but may still be used to support an explanation of interdependence — as part
of game theory.
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Monopolistic
competition
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Understand the characteristics of a monopolistically competitive market
and be able to use these to explain the behaviour of firms in this market
structure.
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Students should be able to carry out diagrammatic analysis of the
market structure in both the short and long run. Students should understand
the importance of advertising and differentiation for the model of monopolistic
competition and be able to contrast this with other market structures.
Students should be able to explain and evaluate the efficiency of monopolistic
competition.
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