Definition of a price maker is a “firm with some power to set price since the demand curve for its output slopes downward”, that in effect, means those firms with a downward sloping demand curve have some market power.
1. How does a firm then maximize their total revenue? Explain the relationship of demand curve and total revenue curve, indicating which of the four types of market structures market power like this will occur (that is, perfect competition, monopolistic competition, oligopoly, monopoly).
2. What happens when the firm raises its price in the market in which price is in an inelastic range of the demand curve?
3. What happens when the firm raises its price in a market in which the price is in an elastic range of the demand curve?