A national chain owns 75% of electric vehicle charging points on major roads. It plans to raise its charging rate after electricity costs increased, while t...
Question 1 Report
A national chain owns 75% of electric vehicle charging points on major roads. It plans to raise its charging rate after electricity costs increased, while two smaller networks are expanding slowly.
(a) State the market share held by firms other than the national chain. [1]
(b) Explain one reason why the charging market may be concentrated. [2]
(c) Use the scenario to explain one possible government policy to increase competition. [3]
Answer Details
(a) Firms other than the national chain hold:
\[100\%-75\%=25\%\]
Their combined market share is 25%. [1]
(b) Charging networks require expensive infrastructure and access to suitable roadside sites. [1] These high barriers to entry make it difficult for new firms to enter, leaving a few firms with large market shares and making the market concentrated. [1]
(c) The government could provide grants for new charging networks. [1] This lowers the infrastructure cost barrier facing potential entrants. [1] More firms could then compete with the national chain, potentially reducing charging rates and increasing consumer choice. [1]
Other valid policies include requiring access to suitable roadside sites or conducting a competition investigation into the dominant firm's behaviour.
Download The App On Google Playstore
Everything you need to excel in your exams
