'The internet has benefited small firms and has helped to make some markets more competitive.' Explain...

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'The internet has benefited small firms and has helped to make some markets more competitive.' Explain why this might be the case. (15 marks) A size of a firm can be measured by looking at certain factors, such as the number of workers employed, amount of capital invested, the volume of their output, and more. A firm is classed as small if these factors are low, for example the number employed being less than 50. If there are many firms in a market, then competition would rise, as there are more sellers competing to provide their goods and services to consumers. The use of internet could reduce the costs of a small business; the internet can provide the firm with an online presence, which can incentivise the owners to no longer run a physical store in order to provide their goods and services if their online output matches or exceeds the output of a store. This means that the high costs of paying rent are now replaced with the smaller costs of operating online (land is considered to be an expensive fixed factor of production). Furthermore, as online shopping is becoming more frequent, the number of potential buyers might be more than on the high street, where many stores are competing for customers to enter - due to the ease of access to the internet, there would be more visits to a website than to a store. As a result there would be an shift in average costs, from C1 to C2 and an increase in output from Q1 to Q2, causing the long run average cost curve to shift outwards. Also, barriers of entry would be lowered which allows other firms to enter the market: entrepreneurs will have an incentive to enter the market due to the lower running costs. The more sellers in the market, the more competitive the market as the number of buyers do not shift as much. Moreover, the internet can create a better distribution of information, allowing small firms to be more knowledgeable of the products that they are providing. This means that small firms can improve their good or production to compete with larger firms in the market. Since the internet can be accessed globally, a firm would now be able to provide goods to other countries, compared to before when they could not have due to only having a presence on the high street, meaning more firms are competing on a global scale. However, the internet can only help small firms in certain markets. In perfect or monopolistic competitive markets, small firms are benefited by the reasons mentioned above, but in an oligopoly, a small firm may not receive as strong of a benefit. For example, online grocery shopping in the UK is dominated by large firms such as Tesco or Asda, therefore small firms in this market would struggle to attract demand when there is already a strong online presence by these large providers. 'The internet has benefited small firms and has helped to make some markets more competitive.' Explain why this might be the case. (15 marks) A size of a firm can be measured by looking at certain factors, such as the number of workers employed, amount of capital invested, the volume of their output, and more. A firm is classed as small if these factors are low, for example the number employed being less than 50. If there are many firms in a market, then competition would rise, as there are more sellers competing to provide their goods and services to consumers. The use of internet could reduce the costs of a small business; the internet can provide the firm with an online presence, which can incentivise the owners to no longer run a physical store in order to provide their goods and services if their online output matches or exceeds the output of a store. This means that the high costs of paying rent are now replaced with the smaller costs of operating online (land is considered to be an expensive fixed factor of production). Furthermore, as online shopping is becoming more frequent, the number of potential buyers might be more than on the high street, where many stores are competing for customers to enter - due to the ease of access to the internet, there would be more visits to a website than to a store. As a result there would be an shift in average costs, from C1 to C2 and an increase in output from Q1 to Q2, causing the long run average cost curve to shift outwards. Also, barriers of entry would be lowered which allows other firms to enter the market: entrepreneurs will have an incentive to enter the market due to the lower running costs. The more sellers in the market, the more competitive the market as the number of buyers do not shift as much. Moreover, the internet can create a better distribution of information, allowing small firms to be more knowledgeable of the products that they are providing. This means that small firms can improve their good or production to compete with larger firms in the market. Since the internet can be accessed globally, a firm would now be able to provide goods to other countries, compared to before when they could not have due to only having a presence on the high street, meaning more firms are competing on a global scale. However, the internet can only help small firms in certain markets. In perfect or monopolistic competitive markets, small firms are benefited by the reasons mentioned above, but in an oligopoly, a small firm may not receive as strong of a benefit. For example, online grocery shopping in the UK is dominated by large firms such as Tesco or Asda, therefore small firms in this market would struggle to attract demand when there is already a strong online presence by these large providers.