1.2.4 Business competition

Advantages and disadvantages of competition to firms, consumers and the economy, including:

• efficiency
• choice
• quality
• innovation
• price.

Advantages and disadvantages of large firms and small firms.

Factors influencing the growth of firms:

• government regulation
• access to finance
• economies of scale
• the desire to spread risk
• the desire to take over competitors.

Explain why firms may stay small because of market size, niche-market characteristics, lack of finance or the entrepreneur’s aims.

Definition of monopoly.

Main features of monopoly:

• one business dominates the market
• unique product
• price-maker
• barriers to entry:
  • legal barriers
  • patents
  • marketing budgets
  • technology
  • high start-up costs.

Evaluate monopoly in terms of efficiency, choice, quality, innovation, price and economies of scale.

Definition of oligopoly.

Main features of oligopoly:

• few firms
• large firms dominate
• different products
• barriers to entry
• collusion
• non-price competition
• price competition.

Advantages and disadvantages of oligopoly:

• choice
• quality
• innovation
• collusion and cartels fixing high prices
• price wars between oligopolies.