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Qn2 - Comment on the strategies available to a profit maximising firm in an imperfectly competitive market. by Mind Map: Qn2 - Comment on the strategies available to a profit maximising firm in an imperfectly competitive market.
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Qn2 - Comment on the strategies available to a profit maximising firm in an imperfectly competitive market.

Pricing and output strategy

Price-setter due to market power

Face downward sloping DD=AR (will not lose all its customers if it raises prices)

MR is half of DD=AR since it has to lower price of all previous units when selling the additional unit

Profit maximising output is where MC=MR (< socially optimal level of output where MC=DD=MB)

Output is restricted and prices are higher

Net welfare loss to society, inefficient

Advertising

Basis:

Intensity depends on:

How:

Effects:

Evaluation:

Innovation

Basis:

How:

Effects:

Evaluation:

Non-cooperative Strategic Behaviour

Predatory Pricing

Raising rival's cost

Conclusion/Evaluation

Firm Level

Macroeconomic Level