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The birth and growth of firms.
Understand how firms begin and the constraints on their development.
The motives for the growth of firms.
Understand the reasons why firms seek an expansion in market shares and
may derive monopoly power.
Internal and external growth.
Internal Expansion: vertical, horizontal and conglomerate mergers.
Distinguish between different methods of the growth of firms.
The increased importance of multinational / transnational firms (MNCs).
Understand the significance of MNCs as major sources of the output of
goods and services in a global context.
Alternative motives of firms.
Profit maximisation, revenue maximisation and sales maximisation.
Distinguish between different corporate objectives and exemplify these
diagrammatically.
Productive efficiency.
Understand that a market is productively efficient when output is produced
at lowest possible average cost.
Allocative efficiency.
Understand that a market is allocatively efficient when output is produced
at a price paid by consumers that is equal to the marginal cost incurred
in producing that output.
Measures of market concentration.
Interpret the meaning of concentration ratios.
Pricing and output decisions under different market structures and different
motives.
Compare different market structures with reference to economic efficiency
and market performance.
" perfect competition
" imperfect competition
" oligopoly
" monopoly.
The conditions necessary for price discrimination in monopoly.
Analyse the conditions for, and the implications of, price discrimination
for both producer and consumer surplus.
Pricing and Non-Pricing Strategies.
" cost-plus pricing
" predatory pricing
" limit pricing
" advertising and sales promotion policies
" collusion and cartels.
Barriers to entry and exit.
Recognise the distinction between various forms of market behaviour and
the contexts in which they might be employed.
Explain factors that may inhibit the entry of firms into a market and
also exit, e.g. sunk costs (links with unit 2).
Contestable markets.
Understand how the threat of new entry may influence behaviour and market
performance of existing firms.
Competition policy in the UK and EU.
Analyse the effects of measures aimed at enhancing competitive markets
on both consumers and producers. Detailed knowledge of legislation concerning
UK and EU competition policy is NOT required.
Regulation of privatised industries.
Analyse how the creation of regulatory agencies, e.g. Oftel and Ofwat,
aim to influence the behaviour of suppliers in markets where there were
formerly state owned undertakings.