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Keynes's simplified starting point is this: assuming that an increase in the money supply leads to a proportional increase in income in money terms (which is the quantity theory of money), it follows that for as long as there is unemployment wages will remain constant, the economy will move to the right along the marginal cost curve (which is ...
Firms operating as monopolies or in imperfect competition face downward-sloping demand curves. To sell extra units of output, they would have to lower their output's price. Under such market conditions, marginal revenue product will not equal . This is because the firm is not able to sell output at a fixed price per unit.
Enterprises entering the monopolistic competition market may realize profit increase or loss in the short term, but will realize normal profit in the long run. If the price of the enterprise is high enough to offset the fixed cost above the marginal cost, it will attract the enterprise to enter the market to obtain more profits.
Abnormal profit persists in the long run in imperfectly competitive markets where firms successfully block the entry of new firms. [3] Abnormal profit is usually generated by an oligopoly or a monopoly ; however, firms often try to hide this fact, both from the market and government, in order to reduce the chance of competition, or government ...
The book discusses the views of Alfred Marshall and Arthur Cecil Pigou on competition and the theory of the firm. Marshall believed that competition was imprecise, with prices being influenced by the rise and fall of demand. He also used the analogy of trees in a forest to explain how firms grow and establish a monopoly.
The greater the degree of imperfect competition in the output market, the lower the real wage and hence the more the reduction falls on leisure (i.e. households work more) and less on consumption. Hence the fiscal multiplier is less than one, but increasing in the degree of imperfect competition in the output market. [23]
The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size of sellers, entry and exit barriers, nature of product, price, selling ...
The short-term Phillips curve looked like a normal Phillips curve but shifted in the long run as expectations changed. In the long run, only a single rate of unemployment (the NAIRU or "natural" rate) was consistent with a stable inflation rate. The long-run Phillips curve was thus vertical, so there was no trade-off between inflation and ...