Price and Output Determination in Markets
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Analyze price and output determination in imperfect, monopoly, and perfectly competitive markets.
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Solution Summary
How different degrees of imperfection in the market affect prices is explained in a structured manner in this response. The answer includes references used to aid in the understanding.
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In imperfect competitive markets there are some but not all features of competitive markets. These include monopolistic competition and oligopoly. In oligopoly there are different methods by which prices are set. One method is price leadership where the leader informally sets prices and the other competitors accept the price. Alternately the firms choose prices at the same time. In oligopoly firms have the ability to set prices. Each firm makes an output decision assuming that the other firm's behavior is fixed. In oligopoly firms react to changes in the output of the other firm. What is important is that firm's outputs are perfect substitutes. In case of monopolistic competition the firms' outputs are not perfect substitutes. At ...
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- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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