EC270 Chapter Notes - Chapter 6: Economic Equilibrium, Equilibrium Point, Reservation Price
Document Summary
You will still face the supply-side challenges of efficient production and cost control. From the demand side, managers must choose the profit maximizing output when the price is given. Managers cannot overrule the price set by the interaction of the aggregate market demand and supply curves. An individual managers cannot influence the market price. The situation of a price-taking producer is one of four general categories of market structure we investigate. Perfect competition when there are many firms that are small relative to the entire market and produce similar products. Monopolistic competition when there are many firms and consumers, just as in perfect competition however, each firm produces a product that is slightly different from the products produced by the other firms. Market structures vary substantially in the extent to which managers can control price. Managers in perfectly competitive markets have no control over price.
