Optimal Price and Output Level Under Different Market Structures
An optimal price can be defined as the price at which a seller can make the highest profit possible; that is, the seller’s price is maximized. The rule of marginal output postulates that profit is maximized by producing an output,…
Factors Affecting Long-run Equilibrium Under Each Market Structure
A firm is said to be at equilibrium if the marginal cost (MC) is equal to marginal revenue (MR), and that is the profit-maximizing level of output. Perfectly Competitive Markets In the long run, if firms under perfectly competitive markets…
Solving Counting Problems through Labeling, Factorial Notations, Combinations, and Permutations
Counting problems involve determination of the exact number of ways two or more operations or events can be performed together. For instance, we might be interested in the number of ways to choose 7 chartered analysts comprising 3 women and…
Introduction to Probability Distributions, Probability Functions, and Types of Variables
Probability Distribution The probability distribution of a random variable “X” is basically a graphical presentation of the probabilities of all possible outcomes of X. A random variable is any quantity for which more than one value is possible. An example…
Cumulative Distribution Function (CDF)
A cumulative distribution function, F(x), gives the probability that the random variable X is less than or equal to x: $$ P(X ≤ x) $$ By analogy, this concept is very similar to the cumulative relative frequency.
Discrete Random Variables and Outcomes
A discrete random variable can take on a finite or countable number of values. It is a random variable where it is possible to list all the outcomes. Recall that a random variable is just a quantity whose future outcomes…
Describe Pricing Strategy Under Each Market Structure
Pricing strategy can be described as the range of methods that the firms use to price their products and services. Companies and firms always set prices in accordance with the market structure in which they operate.
Use and Limitations of Concentration Measures in Identifying Market Structure
Concentration Ratio The concentration ratio is the sum of market shares covered by the largest N firms. It is determined by finding the sum of sales value for the largest firms and dividing it by the total market sales. Therefore,…
Gross Domestic Product Using Expenditure and Income Approaches
The aggregate output of an economy is the value of all the goods and services produced within a predetermined period of time. On the other hand, aggregate income refers to the economic value of all payments received by the suppliers…
Type of Market Structure Within Which a Firm Operates
Economists focus on the nature of competition and the pricing model in a particular market when describing a market structure. Since firms price their products based on the market structure, pricing, therefore, depends on competition. A market structure is often…
