Perfect competition is a market structure where many firms offer a homogeneous product. Because there is freedom of entry and exit and perfect information, firms will make normal profits and prices will be kept low by competitive pressures. Features of perfect competition Many firms. Freedom of entry and exit; this will require low sunk costs. …
A multinational company is a global operation with the production and distribution of its goods located in numerous countries. Typically multinationals have different stages of the supply chain located in different countries. This enables the firm to specialise production in countries where it has a comparative advantage. The firm gains many benefits of being global …
Definition: Mercantilism is an economic theory where the government seeks to regulate the economy and trade in order to promote domestic industry – often at the expense of other countries. Mercantilism is associated with policies which restrict imports, increase stocks of gold and protect domestic industries. Mercantilism stands in contrast to the theory of free …
What factors enable a firm to grow in size? Internal expansion When a firm increases size through increasing production and sales. External expansion – When the firm grows through a merger with another firm. Internal expansion can involve Cutting price to increase sales and gain more market share. This may make the firm less profitable …
Definition: Monopolistic competition is a market structure which combines elements of monopoly and competitive markets. Essentially a monopolistic competitive market is one with freedom of entry and exit, but firms can differentiate their products. Therefore, they have an inelastic demand curve and so they can set prices. However, because there is freedom of entry, supernormal …
Table of contents
Trading blocks are groups of countries who form trade agreements between themselves. Trading blocks can include Free trade areas – elimination of tariffs between economies in the trading block Customs union – free trade area + a common external tariff with non-members Economic union/Single market – Customs union + common rules and regulations. Different types …