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Discuss and Explain How the Marginal Decision Rule, MR =

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Essay

Discuss and explain how the marginal decision rule, MR = MC, will result in profit maximization for the firm in perfect competition. Why can economic profit exist in the short run but not in the long run?


Definitions:

Fixed-price Policy

A fixed-price policy is a pricing strategy where the seller sets a specific price for a product or service that is not subject to change based on fluctuations in the market or inventory levels.

Penetration Pricing

A pricing strategy where the price of a product is initially set low to enter a competitive market and attract customers.

Skimming Pricing

A pricing strategy where a firm sets relatively high prices at the launch of a new product or service to maximize profits from customers willing to pay more.

Fixed-price Policy

A pricing strategy where the price of a product or service is set and not subject to change based on market fluctuations.

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