Full text: Price Takers' Plenty in a Model of Pure Capitalism.

The price so set equates MR from price changes to MC; but it also 
sets ME from nonprice competition and^extraneous changes in sales above MC, 
since they remain equal to price, which is set above MC. The price maker 
therefore, unlike the perfectly competitive price taker, always finds it 
profitable to make additional sales at set prices; and he will do so a.t 
least in the short run, during which costs of change and the requirements 
of maintaining goodwill keep his price stable. Similarly, he will also 
find it profitable to attract new customers and stimulate demand by advertising, 
design changes, quality improvements, or any of the innumerable other forms 
and aspects of nonprice competition. That is so, because the gap between 
price and MC is a measure of his marginal gain (KG) from additional sales 
at his set price, whether those result from external circumstances beyond 
his control, in which case the marginal gain is a net gain, or whether the 
additional sales are brought about by nonprice competition, in which case 
the costs of such nonprice competition offset part of the marginal gain. 
Let me just add that nonprice competition is a feature of competition among 
monopolists or monopsonists and only comes about when they use their market 
■power to impose a monopoly or monopsony price.

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