The Continuum of Market Structures

In most economic textbooks and lessons we teach four market structures. Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. And we tend to get told that these structures are completely independent and unique from each other. However, this can cause some confusion amongst students, especially those who actually stop and think about it for a minute… Continue reading The Continuum of Market Structures

Marginal and Average Costs

Two other costs that we need to consider are marginal and average costs. Average costs are quite easy to understand. To work out the average cost for the firm we have to take the total costs and divide that by the units we have produced. For the example of the dress firm then: Total costs… Continue reading Marginal and Average Costs

Fixed and Variable Costs

All costs firms fall into one of two categories. They will be fixed costs which are costs that don’t vary with output. Or they will be variable costs which do vary with output. If we took the example of a firm making dresses a fixed cost could be a dress factory. The cost of this… Continue reading Fixed and Variable Costs

Question on Contestability: ‘How can you tell if it is contestable or competitive?’

A student asked me a good question a couple of days ago, the question was, roughly:  ‘How can you tell if a firm is keeping prices low because it is a contestable market or because it is actually already facing competition.’ I asked her to explain and she pointed to an example where she lives. On her… Continue reading Question on Contestability: ‘How can you tell if it is contestable or competitive?’