I was doing a test paper from the teacher, and two of the questions I couldn't answer, and I cannot find anything in my notes.
How do I do these into a diagram?
- Economies of scale
- Market share
If someone could do one in paint and then upload it to www.tinypic.com or something please?
P.S I'm fully aware what economies of scale and market share are, I have no clue on how to do a diagram!
The economies of scale diagram is simply an AC curve, with cost and output on the axes; the beginning of the curve up to the lowest point shows economies of scale (the fall in LRAC...) whilst the minimum point up to the end of the curve shows diseconomies of scale. As for market share, it depends on the how dominant the firm is; in say, a monopoly or an oligopoly, a firm is able to make large abnormal profit due to a lack of competition, or complete absence of it.
Oppositely however, a much more contestable market will prevent any gain in abnormal profit a la this diagram
Hope this helped
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