After a merger, one large company runs every scheduled passenger ferry to a group of islands and owns the terminals. Passenger numbers fall sharply each winter, although residents still depend on the crossings. Constructing alternative terminals would be expensive.
Which judgement is most balanced?
The company's scale may help it hold reserves for winter sailings, but protection from entry may allow operating waste to persist.
Residents may depend on the crossings all year, but that dependence is likely to reduce the operator's market power.
Costly terminals may protect the operator from entry, but this is likely to strengthen its incentive to eliminate operating waste.
Seasonal demand may reduce annual profit, so the ferry market is likely to become competitive without another operator entering.
149 exam-style questions on AQA GCSE Economics 1.5 Competitive and concentrated markets, covering 1.5.1a The range of market structures, 1.5.1b Distinguishing between market structures, 1.5.2a Characteristics of a competitive market, 1.5.2b How producers operate in competitive markets, 1.5.2c The economic impact of competition, 1.5.3a Characteristics of a non-competitive market, 1.5.3b How producers operate in non-competitive markets, 1.5.3c Monopoly and oligopoly, 1.5.4a The labour market and wage determination, and 1.5.4b Gross and net pay. Each one has a worked solution and a mark scheme showing where the marks go.