Objectives and Pricing Policies of Firms
49 questions· page 1 of 5
Oligopolies are able to avoid price competition while maintaining supernormal profits in the long run.
Evaluate this statement.
Evaluate the consequences for the price and output of a firm if it changes its objective from profit maximisation to sales maximisation as a response to the principal-agent problem.
Some firms frequently use price discrimination.
Assess the view that when this occurs, price discrimination will always benefit the producer at the expense of the consumer and society.
Some firms frequently use price discrimination.
Assess the view that when this occurs, price discrimination will always benefit the producer at the expense of the consumer and society.
High market concentration ratios are closely linked to oligopoly market structures.
Explain what this means and consider its importance in relation to the pricing policy of an oligopoly firm.
Limit pricing may sometimes be used by a monopoly. It creates a barrier to entry which benefits consumers in the short run but increases costs to the consumer in the long run.
Discuss this statement.
‘A firm is fully aware of market conditions and its best rational interest would be achieved by pursuing the clearly defined objective of maximising profits.’
Consider whether this statement has any merit in different market structures.
‘A firm is fully aware of market conditions and its best rational interest would be achieved by pursuing the clearly defined objective of maximising profits.’
Consider whether this statement has any merit in different market structures.
The wages of the Chief Executive Officers (CEO) of the six largest banks in the United States (US) were reported to be between 250 and 360 times the average wage of the workers in those banks. The six CEOs were all male.
Discuss the extent to which economic theory can account for these variations in wages.
Discuss how the objective of a firm in an oligopolistic market might differ from the objective of a firm in a perfectly competitive market.
A businessman claimed it was difficult to make decisions as his business was subject to uncertainty and interdependence.
Discuss the methods used by oligopoly firms to reduce uncertainty and interdependence and the extent to which these methods exploit the consumer.