Question

Is there any market in which firms do not follow profit maximisation rules when they act?

Is there any market in which firms do not follow profit maximisation rules when they act?

Homework Answers

Answer #1

In economic theory the profit maximisation rules has been retained for the perfectly competitive, or monopolistic competitive firm, or monopolistic. However it is abandoned for the oligopoly firm because it is difficult to determine at what level of output it can maximize the profit. The interdependence and the diversity of the oligopolistic firms especially in terms of concentration ratios makes it difficult to determine the best strategy on pricing. If any of the firms in oligopoly cheats and causes a price war it wall cause reduction of profits even cause to operate at losses

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Should profit-maximizing firms be regulated, or do they generally act in society’s best interest?
Should profit-maximizing firms be regulated, or do they generally act in society’s best interest?
When the existing firms in a monopolistically competitive industry earn above-normal profit: A. New firms enter...
When the existing firms in a monopolistically competitive industry earn above-normal profit: A. New firms enter into the market, and entry continues until firms earn normal profit B. New firms have an incentive to enter the market but are legally barred from doing so. C. Their cost structure automatically changes. Eliminating the additional profit. D. New firms have no incentive to enter the market. E. They increase their production and lower the price level Which of the following is a...
Two firms simultaneously decide whether or not to enter a market, and if yes, when to...
Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 5 periods: starting in period 1 and ending in period 5. A firm that chooses to enter can enter in any of the five periods. Once a firm enters the market in any period it has to stay in the market through period 5. In any period tt that the the firm is not in the market,...
Under the maintained assumption that firms are profit maximizers, what is the general profit maximizing rule...
Under the maintained assumption that firms are profit maximizers, what is the general profit maximizing rule that firms regardless of market structure follow in determining their output level? Why is the monopolist unable to determine unilaterally both price and quantity?
did you have any food rules growing up? do you have any food rules in your...
did you have any food rules growing up? do you have any food rules in your household now? if not, would you consider any food rules in the future? please provide at least one example of a possible health oriented food rule
Pick a monopolistically – competitive market of your choice. Identify any 3 factors through which firms...
Pick a monopolistically – competitive market of your choice. Identify any 3 factors through which firms in that market can differentiate themselves from rival firms.
In which if the following market structure can firms make a postive profit in the short...
In which if the following market structure can firms make a postive profit in the short run? A. perfect competition only B. monopoly and oligopoly only C. monopolistic competition only D. perfect competition, monopoly, oligoply, and monopolistic competition
Firms profit is maximized when ______________ is equal to __________ and when _____________ is rising.
Firms profit is maximized when ______________ is equal to __________ and when _____________ is rising.
Revisit Shneiderman’s 8 Golden Rules and answer the following questions. Which rules still apply? Which rules...
Revisit Shneiderman’s 8 Golden Rules and answer the following questions. Which rules still apply? Which rules apply but require modification? Do any rules no longer apply? Do we need new rules for Mobile Apps?
When the number of firms in a market is small, Select one: a. firms generally organise...
When the number of firms in a market is small, Select one: a. firms generally organise as a cartel b. firms are less concerned about the behaviour of competitors, since there is always sufficient demand to keep all firms happy c. firms are guaranteed a positive economic profit d. firms must generally consider how competing firms respond to their decisions