For a perfectly competitive firm and for an imperfectly competiitve market,explain how the index (P-MC)/P demonstrates the degree of pricing or market power.
What would be the sifnificant consequences of the diffrences between perfectly competitive markets and imperfectly competitive markets?
This is really not a maths question. Fortunately i am a second rate economist as well as a second rate mathematician.
Complete the following steps to understand the answer:
What is the price in a perfectly competetive market?
What is the value of the index in this case?
Is the price higher or lower than this in an imperfect market with market power?
Is the value of the index higher or lower in this case?
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