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If you are the only producer of a good or service, you can price wherever you want. If you price low, more people will want to buy, and you can increase the price and decrease your out put until you reach a maximum amount of profit. At this point, a monopolistic firm usually has more revenue than price; They could afford a lower price and greater output, but they wouldn't make as much money. (The quantity of maximum profit is at the point where marginal cost meets marginal revenue). If another firm enters the market, it can price just a little bit lower than the original firm, and it will get most of the business. This will cause a price war until each firm is pricing and producing at the point where average costs are at a minimum and neither firm ears profit; cost equals revenue. As more and more firms enter a market, the price becomes more and more stable. For a good like gold that is the same no matter where you buy it, the price is the same globally because if a firm priced higher, it would loose all its business. In short, competition causes the price for a good to be such that firms do not earn profit and the price lies at the value of a perfectly elastic demand curve.
Wiki User
∙ 14y ago
Wiki User
∙ 9y agoIf pricing includes a low profit margin, then other potential competitors can't get started because they can't recover their startup costs.
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What is competition and how does it affect the market?
competition affects price quality and quantity in grocery store
Compare and contrast price vs non-price competition?
Price competition refers to as who will sell for the lowest price. Meanwhile, non-price competition refers to the person who can sell the most attractive product.
How do firms engage in price competition?
Firms might engage in price competition by advertising that they offer the lowest price on selected merchandise. Price competition lowers the selling price of the good, relative to competitors' prices.-From Usatestprep.com
Distinguish perfect competition and imperfect competition?
In imperfect competition the producer is the price maker. Whereas in perfect the producer is the price taker meaning there are many producers and no one can influence the price.
Why firms choose non-price competition over price competition?
Imperfectly competitive firms engage in none-price competition (like advertisement). For example, in monopolistic competition, each firm has their own customers(by establishing some consumer loyalty), modest change in the output price of any single firm has no perceptible influence on the sales of any other firm, i.e one firm can raise price without losing all customers. Therefore, price competition makes no sense.
What is competition and how does it affect the market?
competition affects price quality and quantity in grocery store
What effect does competition have on price and why?
Competition will lower the price of products
Compare and contrast price vs non-price competition?
Price competition refers to as who will sell for the lowest price. Meanwhile, non-price competition refers to the person who can sell the most attractive product.
How do firms engage in price competition?
Firms might engage in price competition by advertising that they offer the lowest price on selected merchandise. Price competition lowers the selling price of the good, relative to competitors' prices.-From Usatestprep.com
Distinguish perfect competition and imperfect competition?
In imperfect competition the producer is the price maker. Whereas in perfect the producer is the price taker meaning there are many producers and no one can influence the price.
Advantages of Competition Based Pricing?
what are the advantage of competition based price
What are the determinants of performance?
Some of the determinants of export performance include international competition and the price of inputs. Weather and other disasters can also affect export performance.
What term refers to independent firms that agree to eliminate price competition among themselves?
Price fixing is when companies conspire to eliminate price competition among themselves.
Why firms choose non-price competition over price competition?
Imperfectly competitive firms engage in none-price competition (like advertisement). For example, in monopolistic competition, each firm has their own customers(by establishing some consumer loyalty), modest change in the output price of any single firm has no perceptible influence on the sales of any other firm, i.e one firm can raise price without losing all customers. Therefore, price competition makes no sense.
Factors affecting shares market?
There are several factors that affect shares market. Some of them include price, competition, nature of product, demand and so much more.
What are the determinants of export performance?
Some of the determinants of export performance include international competition and the price of inputs. Weather and other disasters can also affect export performance.
What are 5 factors that affect the demand of fast moving consumer good?
The 5 factors that affect the demand of fast moving consumer good include the price, quality, availability, competition and the use of the products. There are many other factors that affect the demand for such commodities
