Why a firm is not increasing/decreasing profits

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  • Evaluate why the firm is not increasing/decreasing their price
    • Highly competitive markets
      • Eval: Are goods homogenous
    • May be using non pricing strategies
      • Eval: May raise cosst depending on strategy ussd
    • Monopsony  power allows supermarkets to keep costs low by squeezing supliers
      • Eval: Depends on the degree of mompsony power
    • Kinked demand curve: suggests that price should remain constant to avoid price wars
      • Eval: No guarantee firms will react as the model sugests
    • May be colluding
      • Eval: Collusion is illegal


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