Competitive Pricing Techniques: Economics of the Firm
Content Summary Overview
Once production decisions have been made, a firm can be represented by it’s cost function
Total costs of production are a function of quantity produced
For pricing decisions, we focus on marginal cost
Now, the firm takes it’s costs and consumer as given and chooses a quantity (or price) to maximize profits
Perfectly competitive firms face demand curves that are perfectly elastic (infinite elasticity. Hence, the markup (and profits) are zero)
Note: Industry elasticities in competitive industries are always less than 1 (industry profits could be increased by raising price!)
File Category: Economy General
File Added: Tuesday, May 4th, 2010
File Source: nd.edu
File Size: 1.6 MB
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