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to reduce the quantity sold so as to reduce production costs.
to take advantage of customers.
to increase profits.
to increase total economic surplus.
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How do firms engage in price competition?
Firms might engage in price competition by advertising that they offer the lowest price on selected merchandise. Price competition lowers the selling price of the good, relative to competitors' prices.-From Usatestprep.com
Competitive firms are assumed to do what?
Be price takers.
There is no control over price by firms in?
Pure competition
Why do oligopolies avoid price competition?
Kinked Demand Curve Theory:It shows why prices in oligopolistic markets tend to remain stable, and why price competition creates price wars so firms compete on non-price factors instead.Price is at P on the graph. If one firm raised their price, other firms will lower there price and capture market share from the firm that initially raised its price. This is because more consumers are likely to buy from the firms with a low price rather than high price. So a rise in price results in a bigger fall in demand - ELASTIC demand. This means LOWER REVENUES for the firm that raised prices.If one firm lowered their price, because of interdependence, other oligopolies will also lower their price so as not lose their market share. Therefore firms will be competing on price which means all firms' revenues will be lowered. A decrease in price creates a smaller increased in demand - INELASTIC demand.Therefore, by lowering/raising firms will lose out either way, Therefore, in order to avoid price wars prices remain stable and firms use non-price competition (or firms may collude to create monopoly power).
If De Beers can price discriminate perfectly to which customers will sell diamond and at what price?
Any diamond, reagardless of the seller, is worth the price that any buyer will pay for it.
Going rate pricing?
All firms do have the power to fix a price ,but insteadof doing so,in a competitive market situation firms fix a price which is equal to the average price charged by all firms in an industry,ie,it collects all the prices firms with same product and compute the average.
Which term means the amount that firms will produce and sell at a specific price?
Quantity supplied is the amount that firms will produce and sell at a specific price.
Break even price?
Breakeven price is that price where firms are at no profit and no loss stage.
How do firms engage in price competition?
Firms might engage in price competition by advertising that they offer the lowest price on selected merchandise. Price competition lowers the selling price of the good, relative to competitors' prices.-From Usatestprep.com
Competitive firms are assumed to do what?
Be price takers.
There is no control over price by firms in?
Pure competition
If De Beers can price discriminate perfectly to which customers will sell diamond and at what price?
Any diamond, reagardless of the seller, is worth the price that any buyer will pay for it.
Why do oligopolies avoid price competition?
Kinked Demand Curve Theory:It shows why prices in oligopolistic markets tend to remain stable, and why price competition creates price wars so firms compete on non-price factors instead.Price is at P on the graph. If one firm raised their price, other firms will lower there price and capture market share from the firm that initially raised its price. This is because more consumers are likely to buy from the firms with a low price rather than high price. So a rise in price results in a bigger fall in demand - ELASTIC demand. This means LOWER REVENUES for the firm that raised prices.If one firm lowered their price, because of interdependence, other oligopolies will also lower their price so as not lose their market share. Therefore firms will be competing on price which means all firms' revenues will be lowered. A decrease in price creates a smaller increased in demand - INELASTIC demand.Therefore, by lowering/raising firms will lose out either way, Therefore, in order to avoid price wars prices remain stable and firms use non-price competition (or firms may collude to create monopoly power).
What is a Pure competition?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero Economics profits.
What is pure competitive?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero Economics profits.
Why are Firms competing within a Perfectly Competitive market considered Price Takers?
Short answer: firm is a price-taker because there are numerous firms and consumers which will defeat any price change they make.Long answer: An assumption of perfect competition is that prices remain at the following equilibrium:Price = Marginal cost = DemandIn this situation, the firm is a 'price-taker' because it has no ability to change the price of the good itself (and thus increase its profit margin). This occurs because there are many, equally good firms which will simply keep their price lower if any firm attempts to raise the price. In general, because consumers will buy from the lowest priced-supplier, firms will continually lower their price to make the most profit until the point where P = MC (this being where they can no longer profit from lowering their price). Therefore, firms have no power to make the price because any change they make will simply be defeated by enemy firms or consumers and thus they 'take' whatever price there is.
What role does price elasticity demand play in decision making by business firms?
price elasticity
