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Price is equal to Marginal cost, no one can be made better off without making some other agent at least worse off. When goods are produced in line with consumer preferences.
When the equilibrium output is supplied at minimum average cost. (Lowest point on the average cost curve)
Product or process, occurs over time. Product focuses on those improvements that lead to goods and services which perform better or are of higher quality. Process innovation looks at progress which leads to better methods of production and hence reduces a firm's average costs.
When a firm is not producing on the average cost curve, owing perhaps to 'organizational slack' (usually associated with monopoly)
No barriers to entry
Lots of buyers and sellers
A cost that cannot be recovered (e.g. advertising)
Lower prices because of competing firms
Low barriers to entry
Lower total profits, less loss of welfare
Greater entrepreneurial activity
The value of output from the 5 largest firms/value of output for the industry
Internal - Profits that are generated from the firm are retained and utilized to finance the expansion and growth of the firm; fixed and variable factors are production are increased
External, Horizontal integration - two firms at the same stage in the supply chain and production process merge., Lateral integration - two companies that are related but not identical merge, Vertical integration - Firms within the same industry but at different levels on the supply chain merge, Backward, New node, Conglomerate - a merger between firms in unrelated business'
Technological change - making it easier for firms to outsource both service and manufacturing operations to sub contractors in other countries.
Increased competition - seeking low inflation environments
pressure from financial markets - for businesses to improve their profitability
The level of profit that is required to keep all the factors of production in their present use
The level of profit above normal profit
MC = MR
Incentive to innovate
Incentive to attract new firms to market
Re investing into R&D
Economies of scale.
Monopoly profits used in R&D and Dynamic efficiency.
Scope to be internationally competitive
Lack of competition in the market may reduce quality of service.
Monopolies can use their market power to raise prices.
Monopolies can earn abnormal supernormal profits at the expense of efficiency and the welfare of consumers and society.
productive and/or X inefficiencies can occur as the firm is not making optimum use of scarce resources.
Allocative inefficiency (underconsumption)
The decrease in marginal output as one factor of production is increased, while all others remain constant. (fixed factors become overloaded)