perfect_competition

Will the firm that employs the software genius earn

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Unformatted text preview: price? • Suppose there are two firms, each of which produces computer software. Firm A employs a software genius at the same salary that Firm B employs a mediocre software engineer. Will the firm that employs the software genius earn higher profits than the other firm, ceteris paribus? Topics for Analysis within the Theory of Perfect Competition • Do Higher Costs mean higher prices? • A rise in costs incurred by one of many firms does not mean consumers will pay higher prices • Will the perfectly competitive firm advertise? • What are the costs and what are the benefits of advertising? More Topics for Analysis Supplier-Set price versus MarketDetermined Price: Is this Collusion or Competition? Q&A • In a perfectly competitive market, do higher costs mean higher prices? • Suppose you see a product advertised on television. Does it follow that the product cannot be produced in a perfectly competitive market?...
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This note was uploaded on 09/16/2012 for the course ECONOMICS 90 taught by Professor Srinivas during the Spring '12 term at SMU.

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