AQA A2 Economics Unit 3 (ECON3) 20th June 2016 OFFICIAL THREAD

What are your main arguments on how to make a market more competitive and what are your main arguments on how to make it more contestable since they are different things.

Also what are your main arguments on government intervention in provision, in externalities and in public/merit/demerit goods? (they all have different arguments obvs) . How would you guys organise these in different paragraphs?

mm i like your explanations. make a quick revision guide for me? :') i'm pretty sure offpeak/train ticket times are 3rd degee though because from early mornings or whatever if you've got work you have not choice but to get that ticket as demand is inelastic

Last question ( i promise ) - how would you analyse a Minimum Efficiency Scale diagram when talking about efficiency in monopolies e.g X-efficiency or poductive efficiency or dynamic efficiency with r&d? like i understand one diagram is like \_/ and the other is just a LongRunAverageCostCurve like U but what's the difference? and which diagram would you prefer to use in talking about either of the effiencies?

Last question ( i promise ) - how would you analyse a Minimum Efficiency Scale diagram when talking about efficiency in monopolies e.g X-efficiency or poductive efficiency or dynamic efficiency with r&d? like i understand one diagram is like \_/ and the other is just a LongRunAverageCostCurve like U but what's the difference? and which diagram would you prefer to use in talking about either of the effiencies?

Minimum efficient scale is the FIRST point during production where economies of scale can be exploited so as soon as it falls to the lowest level in terms of costs of production.

When a monopoly operates on MES it is being both X-efficient and productively efficient because costs are kept to a minimum.

It probabaly isn't necessary to analyse the diagram too much you basically just explain that the firm is operating at lowest cost... you can actually use the U shaped LRAC curve but sometimes it is easier to show it like an L shape instead.

When I talk about efficiency I would use
1) EOS diagram showing low ACs
2) Monopoly diagrams are good for showing productive, allocative and dynamic efficiency but it's hard to expain

watch this https://www.youtube.com/watch?v=3Qb8kWM3s2c and https://www.youtube.com/watch?v=ioIhTmw1-qA

what would the main market forces be, i swear this isn't even in the spec :'( then also is government intervention privatisation, regulation, deregulation ect?

mate you can just use a normal monopoly diagram to talk about the efficiencies you dont need those

Don't have any direct notes but just break it down and it'll make sense

There's a diagram that compares the two directly ( I've linked it )

So perfect comp = allocative efficiency = good for consumers cheaper prices and maximum consumer surplus

- also more goods available because there's lots of suppliers in the market

- only normal profit made as a result, have to strive to cuts costs ( most likely productively efficient too).. As a result and therefore no misallocation of resources .. As it's essentially competitive and everyone has perfect knowledge , demands fully elastic e.c.t

Now you could literally argue the opposite with monopolies

- diagram - profit maximisers as the theory of the firm argues MC=MR
- less consumer surplus aren't allocativly efficient as a result
- restrict output put up the price

But this profit can go towards R+D /investments innovation e.c.t improving overall dynamic efficiency in the long run compared to competitive markets where only normal profit is made so it's hard to re invest ( and even if one firm did , because there's perfect knowledge all the other firms would just follow )..

- also could argue its productively efficient as they gain from economies of scale however in the long run there's decreasing marginal returns and diseconomies of scale as management problems e.c.t fall in
- could be added due to X-Inefficiency arguments
- and despite their ATC's doing down and a potential for these cost cuts being passed onto the consumers ... Theory of the firm argument counter argues that .


- extra side points depending on the extract /Q / time in the exam

- monopsony buyers --> exploitation
- overall welfare loss to consumers
- misallocation of resources and market failure created by pollution for example

Stuff like that

Hope that helps xxx




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haahahah thank you... maybe it can be my new career choice after these exams putting economics to good use aye,

Essentially they can overlap I believe

First degree is where consumers pay the maximum they are willing to pay so they have no consumer surplus so people travelling to work in peak times may pay up to their surplus because of inelastic demand AT THE SAME TIME child may jump on this train and pay less, despite still having inelastic demand eg. they may be going to school, except the adult has been double discriminated against here because of age, as well as inelastic demand thus using first and third degree

Hi, I swear in the short run in perfect competition you can obtain supernormal profits and not just normal profits which yh you're right would happen in the long run

yeah in the short run in perfect competition you do gain supernormal profit but because of the assumptions of the model (perfect knowledge and low barriers to entry) other firms know about it and can enter the market freely and eat away at the super normal profit which is why in the long run in perfect competitions only normal profits are achievable

Hi, I swear in the short run in perfect competition you can obtain supernormal profits and not just normal profits which yh you're right would happen in the long run

Where abouts does hit and run entry come into the spec and where can it be applied into an essay? (Very vague question I know, but I'm screwed)

Contestability is the THREAT of competition.
Competitive is similar but to do with the amount of firms in a market.

id answer the rest but i've got spanish tomorrow morning

What are your main arguments on how to make a market more competitive and what are your main arguments on how to make it more contestable since they are different things.

Also what are your main arguments on government intervention in provision, in externalities and in public/merit/demerit goods? (they all have different arguments obvs) . How would you guys organise these in different paragraphs?