(a) What is meant by price rigidity, under oligopoy.
(b) Elaborate the implication of the condition of equilibrium of a firm.
(a) What is meant by price rigidity, under oligopoy.
(b) Elaborate the implication of the condition of equilibrium of a firm.
(a) Price rigidity is the price of the product fixed after deliberations and negotiations by teh oligopolistic firms, to which they generally stick with a view to avoid any sort of price war.
(b) Firm's equilibrium is that level of output where its profits are maximized Conditions of firm's Equilibrium:
(i) Marginal Revenue must be equal to Marginal Cost.
(ii) Marginal cost must be rising.
The condition implies that the slope of rising Marginal Cost Curve is equal to the slope of Marginal Revenue curve.
Impliation of the condition lies in the fact that beyond the equlibrium point MC would become greater than MR. i.e. for each additional unit will be more than the revenue penerated the unit.
(a) Price rigidity is the price of the product fixed after deliberations and negotiations by teh oligopolistic firms, to which they generally stick with a view to avoid any sort of price war.
(b) Firm's equilibrium is that level of output where its profits are maximized Conditions of firm's Equilibrium:
(i) Marginal Revenue must be equal to Marginal Cost.
(ii) Marginal cost must be rising.
The condition implies that the slope of rising Marginal Cost Curve is equal to the slope of Marginal Revenue curve.
Impliation of the condition lies in the fact that beyond the equlibrium point MC would become greater than MR. i.e. for each additional unit will be more than the revenue penerated the unit.
