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Output (Q)

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  1. Revenue Output (Q)

  2. You should be able to discuss the significance of market contestability for the performance of an industry. • You should be familiar with concepts such as ‘sunk costs’ and ‘hit and run competition’. Contestable marketsLearning Objectives

  3. The Banking sector (!) • The budget airline industry • Parcel delivery • Search engine market • Music download market • Mobile phone market • Electricity and gas supply Are the following markets ‘contestable’?

  4. Revenue MC ATC P1 AC1 AR Profit Maximisation where MC=MR MR Output (Q) Q1

  5. Revenue MC ATC P1 P2 AR Normal Profit Contrasted with Profit Maximisation MR Output (Q) Q1 Q2

  6. Contestability is significant because……..

  7. Explain why contestable markets generally function more efficiently than non-contestable markets. (20)

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