Three national firms carry most temperature-controlled food deliveries for supermarkets. They offer similar services, and customers can switch when contracts end. Firm R raises its charge, but its two rivals leave their charges unchanged.
Why could keeping the higher charge reduce Firm R's total revenue?
Customers may switch to the two lower-priced rivals, and the contracts lost may outweigh the higher charge.
The higher charge may directly increase Firm R's cost of completing each remaining delivery.
Changing its charge may make Firm R a price taker even though three firms dominate the market.
The higher charge may reduce the information available to customers comparing all three firms.
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.