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Is it true that a firm with market power can sell whatever quantity it wishes at whatever prices it chooses?
No. Even a simple understanding of economics and price theory will prove this. No matter the firm's market power, price is always set by supply and demand. They can try and command a price on their own, but competitors will find a way to sell the same thing at a lower price. Supply and Demand always dictate price...even in gas prices contrary to what the media would have you believe. If Americans quit using so mus gas, the price would drop. But we keep buying it up and the demand rises during the summer. Since there is only a fixed amount of the product available for the world, this increased demand forces the price up ...because somewhere, somebody is willing to pay it. And if nobody is willing to pay it, they will lower the price to encourage it.
Now, what if the government forced them to lower the price. Suppose they set a limit at 2.00 cents a gallon. The result? There would never be enough gas to last. People would take the opportunity to fill up all their cars, their mowers, their gas cans, their boat...and then the guy who just needs a few gallons can't get any because everyone else bought it up due to an artificial price fix.
Supply and demand are the factors that affect price. Not anything else. It's NOT a company's "greedy" desire for profit. In fact, big oil companies make only about 12 cents on each gallon of gas...the government taxes each gallon nearly 20 cents...so do the math. If X oil company posts a profit of 12 billion dollars, the media goes nuts and everybody calls them greedy...but that means the government just got 20 billion in taxes off the same gas.
Instead of phony "price ceilings" let supply and demand have their way in the market.
What else can I help you with?
What is the difference between a market maker and a market taker in the financial markets?
A market maker is a trader who provides liquidity by offering to buy or sell securities at publicly quoted prices. A market taker, on the other hand, is a trader who accepts the prices offered by market makers and executes trades at those prices.
What can a firm with market power do?
A firm with market power has the ability to control prices and total market output .
Can you explain the difference between a bull and bear market?
A bull market is when stock prices are rising, and investors are optimistic about the economy. A bear market is when stock prices are falling, and investors are pessimistic about the economy.
How market structures determine the pricing and output decisions of businesses?
There are different kinds of markets in different economies/sectors/goods. Accordingly, there are different kinds of output and pricing decisions which take place. Usually, output and pricing decisions are interdependent except for the case of perfectly competitive markets. In perfectly competitive markets, a single firm is so small compared to the market that it cannot affect the prices. In that case, it must take the price as given, and then decide the quantity to be supplied. Price in this market is equal to the marginal cost of production. In monopoly, however, things are different. The monopolist can change the prices, as it is the sole provider of the good and thus has the market power. But here also, if the price increases quantity demanded decreases. Therefore, the monopolist must take under consideration both the positive and negative effects of increase in prices. In another market oligopoly, pricing is a bit more complicated and it depends upon the strategic interaction among the firms.
What is the difference between a market maker and a market taker in the financial industry?
A market maker is a trader who provides liquidity by buying and selling securities, while a market taker is a trader who accepts the prices offered by market makers and executes trades based on those prices.
Is it true that a firm with a market power can sell whatever quantity it wishes at whatever price it chooses?
Not necessarily. If a company has "market power", this would mean that they have more market share than other companies in the industry. If this company tried to significantly increase prices, they can very quickly lose their market power to competitors (assuming that the competitors leave their prices relatively the same) coming in and taking away customers with lower prices. Another rule of thumb is that the more profitable your business is, the more competitive it will become. Others will see that there is money to be made and will join in the market to steal customers away from you. Just because you are a market leader doesn't mean you can jack up your prices and still continue to be a market leader.
When equilibrium demanded is greater than quantity the market prices will what?
rise
What is a market-clearing model?
The market clearing model is a model where prices adjust to equilibrating demand and supply meaning the quantity supply equals the quantity demanded. These models are useful for studying situations where prices are flexible.
How a market reacts to a all in supply by moving to a new equilibrium?
When there is an increase in supply in a market, the initial effect is typically a surplus, as the quantity supplied exceeds the quantity demanded at the original price. This surplus puts downward pressure on prices, prompting sellers to reduce their prices to attract more buyers. As prices decrease, the quantity demanded increases while the quantity supplied may also adjust as producers respond to lower prices. Eventually, the market reaches a new equilibrium where the quantity supplied equals the quantity demanded at the new, lower price.
How does the relationship between quantity supplied and price impact market equilibrium?
The relationship between quantity supplied and price impacts market equilibrium by influencing the point where supply and demand intersect. When the quantity supplied is higher than the quantity demanded, prices tend to decrease to reach equilibrium. Conversely, when the quantity supplied is lower than the quantity demanded, prices tend to increase to reach equilibrium. This dynamic process helps ensure that supply and demand are balanced in the market.
What is a market clearing model?
The market clearing model is a model where prices adjust to equilibrating demand and supply meaning the quantity supply equals the quantity demanded. These models are useful for studying situations where prices are flexible.
How is a surplus is corrected by a competitive market by?
A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price. In a competitive market, this surplus leads sellers to lower their prices in order to attract more buyers. As prices decrease, the quantity demanded increases while the quantity supplied decreases, ultimately moving the market toward equilibrium. This adjustment process continues until the surplus is eliminated, and supply equals demand.
How do supply and demand influence market price in a competitive market environment?
In a competitive market environment, supply and demand interact to determine the market price of goods and services. When demand for a product increases while supply remains constant, prices typically rise as consumers compete for the limited quantity available. Conversely, if supply exceeds demand, prices tend to fall as sellers lower prices to attract buyers. This dynamic balance continues until the market reaches an equilibrium price where the quantity supplied matches the quantity demanded.
What is a marketing model?
The market clearing model is a model where prices adjust to equilibrating demand and supply meaning the quantity supply equals the quantity demanded. These models are useful for studying situations where prices are flexible.
Definition of producer surplus?
the utility to a producer from living in a market where a greater quantity will be supplied when prices increase
What market condition exists when quantity supplied is greater than the quantity demanded?
When the quantity supplied exceeds the quantity demanded, the market is experiencing a surplus. This condition typically leads to downward pressure on prices, as sellers may need to lower prices to encourage consumers to buy the excess goods. Over time, this adjustment helps re-establish equilibrium between supply and demand.
Is changing movie ticket prices illegal?
Theaters can charge whatever the market will bear.
