Market-Pricing Power

The definition of a price maker is a “firm with some power to set price because the demand curve for its output slopes downward,” which in effect, means those firms with downward sloping demand curves have some market-pricing power.

All firms potentially have market-pricing power in the short run, but in the long run, only certain firms possess it.

How does a firm then maximize its total revenue? Describe the relationship of the demand curve and total revenue, indicating in which of the four types of market structures this market-pricing power would occur (i.e., pure competition, monopolistic competition, oligopoly, monopoly) in the long run?

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A firm can maximize their total revenue by selling more products or raising the price on the product. However, we know that firms in perfect competition, monopolistic competition, or oligopolies cannot just do this. So this applies to monopolies. The total revenue curve changes shape as the demand curve changes shape (changes elasticity). So, we see that the more inelastic the demand curv……

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