A new firm is considering entering the glass-bottle market. It would initially produce small volumes, while an established producer supplies most orders from a large factory.
What is the most likely effect of the difference in scale?
Both firms are likely to have the same cost per bottle, because they make the same product.
The entrant is likely to have a lower cost per bottle, because its total costs are smaller.
The entrant is likely to have a higher cost per bottle, making it hard to match the established price.
The established producer is likely to lose market power, because its large factory has higher fixed costs.
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.