1. Profit maximisation
2. Market domination (sales maximisation)
3. Corporate growth (by expanding, diversifying and take-overs)
4. Satisfying profits (sufficient)
Organisation is a price taker.
1. A large no. of buyers and sellers.
2. Consumers aim to maximise satisfaction.
3. Producers aim to maximise profits.
4. All firms sell a homogeneous product.
5. There is a perfect knowledge.
6. All the factors of production are perfectly mobile.
7. There is free entry to and exit from all markets.
Many producers and product differentiation. Frequent entry and exit.
1. more choice
2. non price offers
3. perceived quality
4. stable markets and prices
Few sellers, product differentiation. Barriers to entry.
1. game theory
2. price stabilit
3. non-price competition
4. stabilised market shares
5. price leadeship and collusion
6. shock induced price wars
Two sellers, like oligopoly.
Only one seller (or >25% of the market). No close substitutes + barriers. Profit maximised when TC and TR are furthest apart (not in max. TR). 2MR=AR.
Monopolist must be able to separate the markets + the market elasticities must be different.
Total, Variable and Fixed cost (only in short run). Average total, variable and fixed (declines).
Firm will stay in business until it can cover its variable costs. (p247)
Resale price maintenance was made illegal (RPM), by Office of Fair Trading.
Also the EC have the restrictions on trade practices made by the Treaty of Rome. The mark-up prices and break-even charts are used to determine the right price. Policy is to make AC=AR.
1. Flat bottomed AC (ec. of scale, cars)
2. Research and development
1. Redistribution of income
2. Allocative inefficiency (misallocation)
3. Lack of X-efficiency (minim. of costs)