Many small tool-hire businesses in a county rent out similar equipment at the market price. Several businesses are making losses and some are preparing to leave the market.
Why could the businesses that remain return to profit after others leave?
Each remaining business's cost per hire will fall even if its working practices are unchanged
Demand for tool hire will rise at every price because fewer businesses offer it
The remaining businesses will become price makers able to charge above the market price
Market supply will fall, allowing the hire price and profit margin to recover
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.