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The logic behind antitrust legislation is that if the courts can prevent collusion among sellers of a product, monopoly prices will not result and there will be no restriction of output. There will be no economic profits in the long-run.
American economy is known for and is dominated by conglomerates such as, automakers, airlines, department stores, pharmaceutical companies, supermarkets, financial institutions, and home improvement giants. Despite the variety of products they offer and the services they provide, they have lead to the demise of friendly neighborhood stores.
A rational firm always tries to maximize profit rather than output. The ability of a firm to determine its price and profit depends, among other things, on the market structure. This article analyzes the perfectly competitive market structure to be followed by other market structures in later articles. Output determination is in fact the determination of the supply of the firm.
If perfect competition is at one end of the market spectrum, perfect or pure monopoly is at the other end.
Economics is the study of the use of limited resources by a society for meeting its unlimited wants. Economy is the process which defines how resources are utilized to fulfill wants.
An economic system is the framework which defines and regulates economic activity. Broadly speaking there are two economic systems that a nation may chose from.
In a market economy, individual consumers make plans of consumption and individual firms make plans of production based on the changes in market prices.
There is an inverse, negative relationship between the changes in price and quantities demanded of a good, ceteras paribus, within a given time. That is if all other factors are held constant, consumers are willing to buy more of a good as its prices fall and less of it as its prices rise.
There is a positive relationship between the changes in price and quantities supplied of a good, ceteris paribus, within a given time. That is if all other factors are held constant, sellers are willing to sell more of a good as its prices rise and less of it as its prices fall.
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