Edexcel A-Level Economics A2 3.3.3 8d Significance of Sunk Costs for Contestability Topic Practice

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Pearson Edexcel IAL Economics

Unit 3: Business Behaviour

3.3.1 - Types and sizes of businesses

3.3.2 - Revenue, costs and profits

3.3.3 - Market structures and contestability

3.3.3.1a - concepts of: • allocative efficiency • productive efficiency • dynamic efficiency •

3.3.3.2a - Calculation of n-firm concentration ratios. ratio

3.3.3.2b - significance of concentration ratios

3.3.3.3a - Assumptions of perfect competition. competition

3.3.3.3b - Profit-maximising equilibrium in the short run and long run

3.3.3.3c - short-run shutdown point

3.3.3.3d - Productive and allocative efficiency in the short run and long run

3.3.3.4a - Assumptions of monopolistic competition. competition

3.3.3.4b - Types of product differentiation: • physical - product features • marketing -

3.3.3.4c - Profit-maximising equilibrium in the short run and long run

3.3.3.4d - Productive and allocative efficiency in the short run and long run

3.3.3.5a - Assumptions of oligopoly

3.3.3.5b - Barriers to entry and exit: • economies of scale • limit pricing • patents • branding •

3.3.3.5c - Interdependence of firms: • simple game theory - two firm/two outcome model • reasons

3.3.3.5d - Costs and benefits of collusion to producers, consumers, workers and governments

3.3.3.5e - Price competition: • price wars • predatory pricing • limit pricing

3.3.3.5f - Non-price competition: (continued) • advertising and branding • quality • endorsement •

3.3.3.5g - Costs and benefits of price and non-price competition to firms, consumers, employees

3.3.3.6a - Assumptions of monopoly

3.3.3.6b - Barriers to entry and exit

3.3.3.6c - Profit-maximising equilibrium

3.3.3.6d - Costs and benefits of monopoly to firms and consumers

3.3.3.6e - concept of 'natural monopoly' and its implications

3.3.3.6f - Conditions necessary for third-degree price discrimination

3.3.3.6g - Costs and benefits of price discrimination to firms and consumers

3.3.3.6h - Productive, allocative and dynamic efficiency

3.3.3.7a - Assumptions and conditions for a monopsony to operate

3.3.3.7b - Costs and benefits of a monopsony to firms, consumers and employees

3.3.3.8a - Characteristics of contestable markets

3.3.3.8b - Implications of contestable markets for behaviour of firms on: • profitability •

3.3.3.8c - Costs and benefits of contestability for firms and consumers

3.3.3.8d - significance of sunk costs for contestability

3.3.4 - Labour markets

3.3.5 - Government intervention

Unit 4: Developments in the Global Economy

Assessed quantitative skills

A-Level/Edexcel/Economics//A2/Question Bank/Unit 3: Business Behaviour/3.3.3 - Market structures and contestability/3.3.3.8d - significance of sunk costs for contestability

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