In one town, three established radio stations sell advertising airtime to local businesses. Each station needs a licence to broadcast. A regulator awards licences to two new stations, which start selling airtime to the same businesses.
What is the most likely effect of the new licences?
The established stations' market power is likely to fall, as advertisers have more alternatives.
Barriers to entry are likely to rise, as every station in the town now needs a licence.
The established stations' market power is unchanged, as their own licences are not affected.
The price of airtime is likely to rise, as more stations now compete for the same advertisers.
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.