[SofiaZara]

oh god i hope not, and if it does the questions will doubtfully be related to it.
e.g whats the positive externalities arising from shipping freight? that would be a weird one.
the questions BARELY relate the case study, but the 2 and 4 markers ask for reference thats it - all the other questions are theory with a few key words stolen from the case study.

[Hicky]

I don't think that sea is an important aspect of transport policy in the UK and I doubt that it will come up. Air is significant because there have been massive increases in demand, mergers and acquisitions, deregulation in terms of the Open Skies agreement and NATS privatisation, rail because of Network Rail's natural monopoly, car because of the worldwide increase and the unsustainability... it's about transport policy considered as a whole, and rail, air and bus are significant because they're an appropriate substitute to car transport. You can't get a ferry from London to Manchester but you can get a personal automobile, a train, a plane...

[Hicky]

I don't like this speculation and pattern-forming people do before exams... I can't think of one example where anyone's ever said, "Oh my god, x will come up because y and z came up in 2011!" and they've been spot on.

[gracehousden]

Please can someone explain the factors affecting the supply of transport? I know for demand it is price, price of substitutes, Income, Nature of good, speed, relaibility etc, but haven't got a clue about what actually determines supply!

[Aimanos]

please please please please someone upload or email me the jan 2012 transport paper or mark schemer (or both) ? much appreciated

[ConfusedChris]

Any reliable tip offs for the large marking questions?

[mspmsp]

What diagrams would people say are key to remember for this exam?

[koolkelv]

Got a question. Oligopolies have the feature that they are interdependent, which can be portrayed by the bottom half of the kinked demand curve. If they lower prices, others will follow. Why then, if they raise their prices, would competitors not raise prices if they are interdependent, as well as price makers.

[blackstarz245]

(Original post by Aimanos)
please please please please someone upload or email me the jan 2012 transport paper or mark schemer (or both) ? much appreciated

Here they are! good luck

[gracehousden]

(Original post by koolkelv)
Got a question. Oligopolies have the feature that they are interdependent, which can be portrayed by the bottom half of the kinked demand curve. If they lower prices, others will follow. Why then, if they raise their prices, would competitors not raise prices if they are interdependent, as well as price makers.

Not 100% sure of a right answer, but i have a go!

Say collusion takes place at point P,Q where demand turns from elastic to inelastic then this explains the ideal price to charge, hence price rigidity in oligopolistic markets. If one firm increases their prices, then consumers will switch to others firms within the same market. Despite being interdependent some firms would not co-operate and collude/price fix or match the prices in order to profit maximise because they ultimatley want to be market leaders. So they would undercut in order to gain market share which should also allow them to maximise their profits as they would see a greater level of output due to their prices being slightly lower than that of other firms.

Hope that helps!
Grace

[koolkelv]

(Original post by gracehousden)
Not 100% sure of a right answer, but i have a go!

Say collusion takes place at point P,Q where demand turns from elastic to inelastic then this explains the ideal price to charge, hence price rigidity in oligopolistic markets. If one firm increases their prices, then consumers will switch to others firms within the same market. Despite being interdependent some firms would not co-operate and collude/price fix or match the prices in order to profit maximise because they ultimatley want to be market leaders. So they would undercut in order to gain market share which should also allow them to maximise their profits as they would see a greater level of output due to their prices being slightly lower than that of other firms.

Hope that helps!
Grace

That's quite a good explanation, thanks. Also, what is the difference between monopolistic competition and contestable markets and perfect competition?

[gracehousden]

(Original post by koolkelv)
That's quite a good explanation, thanks. Also, what is the difference between monopolistic competition and contestable markets and perfect competition?

Perfect competition and Monopolistic competition are market structures. Contestable Markets or Contestability IS NOT a market structure, it is a CONDTION.

In perfect competition, products are the same (homogenous) and firms are price takers as they take the price given by the market. As a result they only make normal profit in the long term.

For monopolistic competition, products are differentiated and firms are price makers. In the short term, they are able to make supernormal profits. However. these supernormal profits attract hit and run entrants and this means in the long term only normal profits are made.

For a perfectly contestable market, entry and exit must be costless, there must be the absence of sunk costs and the provision of perfect information. However in reality this NEVER happens. So for a market to have an element of contestability, there are three vital condtions needed. These are low barriers to entry, threat of new entrants and access to the same technology/information as incumbents. To put it into context, it means that monopolistic competition is a contestable market because there are low barriers to entry, it is competitive so there is threat of new entrants, they all more or less have the same access to information. This is a contrast to a Monopoly (e.g rail) where there are high barriers to entry in terms of sunk costs, no threat of entrants due to the franchising arrangement etc.

Sorry for making it long winded, but that is the only way i could explain it. If your still stuck, look at this man, he is an economics GOD!
http://www.youtube.com/user/BrynJonesOnline

[koolkelv]

(Original post by gracehousden)
Perfect competition and Monopolistic competition are market structures. Contestable Markets or Contestability IS NOT a market structure, it is a CONDTION.

In perfect competition, products are the same (homogenous) and firms are price takers as they take the price given by the market. As a result they only make normal profit in the long term.

For monopolistic competition, products are differentiated and firms are price makers. In the short term, they are able to make supernormal profits. However. these supernormal profits attract hit and run entrants and this means in the long term only normal profits are made.

For a perfectly contestable market, entry and exit must be costless, there must be the absence of sunk costs and the provision of perfect information. However in reality this NEVER happens. So for a market to have an element of contestability, there are three vital condtions needed. These are low barriers to entry, threat of new entrants and access to the same technology/information as incumbents. To put it into context, it means that monopolistic competition is a contestable market because there are low barriers to entry, it is competitive so there is threat of new entrants, they all more or less have the same access to information. This is a contrast to a Monopoly (e.g rail) where there are high barriers to entry in terms of sunk costs, no threat of entrants due to the franchising arrangement etc.

Sorry for making it long winded, but that is the only way i could explain it. If your still stuck, look at this man, he is an economics GOD!
http://www.youtube.com/user/BrynJonesOnline

Hm, ok so i'm actually looking at the difference between perfect competition and monopolistic competition. The only differences are that monopolistic competition produces differentiated products. They are also price makers

The similarities are that they both have pools of potential entrants and that entry and exit barriers are supposedly non-existent?

[Hicky]

(Original post by koolkelv)
That's quite a good explanation, thanks. Also, what is the difference between monopolistic competition and contestable markets and perfect competition?

- Perfect competition and monopolistic competition are the same thing except perfect competition has an infinite numbers of buyers and sellers and no differences between product. Monopolistic competition has many buyers and sellers (but not infinite) and minor differentiation between products.
- Perfect competition is perfectly allocatively efficient and productively efficient. P=MC, and the firm produces at the minimum point of the average cost curve. Perfect competition is used as a benchmark and there is actually no market structure in history which is perfectly competitive, since there's always minor product differentiation.
- In monopolistic competition, a firm produces slightly above the minimum point of the average cost curve, on the downward slope of the average cost curve. This means it is not perfectly productively efficient. In addition, it produces at a point where P > MC. Thus, consumers pay too much for an extra unit of output.
- Contestable markets are something different... it's not a market structure, it's a theory by an American economist that if you have no barriers to entry, perfect information, and no sunk costs, it doesn't matter what market structure you have, firms will be efficient in the long-term and there will be desired welfare outcomes. Having a contestable market is the goal of several areas of transport policy, such as the Open Skies agreement and the deregulation of the bus market.

[Chazzybish]

(Original post by koolkelv)
Hm, ok so i'm actually looking at the difference between perfect competition and monopolistic competition. The only differences are that monopolistic competition produces differentiated products. They are also price makers

The similarities are that they both have pools of potential entrants and that entry and exit barriers are supposedly non-existent?

What Hicky has said is good but also be aware that in a perfectly competitive market there are NO barriers to entry/exit, whereas in a monopolistic competitive market there are still SOME barriers, but there are very few of them.

[Hicky]

I thought of it as monopolistic competition having the minimum possible barriers to entry that can exist in a real market. Taxi firms are the most competitive business in transport, yet you obviously call one up because it's on your phone and you can't be arsed finding another one... I dunno, maybe that's a bad way to think of it

[DymentriX]

How do you guys go about asking a 15 mark question? I want to see how people do it in comparison to how I do it

[P.Patel]

What's the difference between a natural monopoly and monopoly? Thanks in advance

[Hicky]

(Original post by P.Patel)
What's the difference between a natural monopoly and monopoly? Thanks in advance

A monopoly is a market structure in which one firm dominates the industry.

A natural monopoly is an argument for the domination of a monopoly in aspects such as rail and air traffic control. Network Rail owns all rail infrastruture, and NATs completely dominates air traffic control. The argument is that they produce overwhelming cost advantages and that they're able to produce a much higher output with more net welfare gain due to economies of scale. Natural monopolies are also associated with 'dynamic efficiency', in which unit costs decrease over time. Natural monopolies allow monopolies also to invest long-term in better technology for an industry, in a way that many firms wouldn't be able to do.

[Hicky]

Oh yeah and it's better to have a natural monopoly in the case of rail and air traffic control so long as they don't abuse their power and they get a subsidy...