Economics Monopolistic Competition Questions
In monopolistic competition, the price-cost margin refers to the difference between the price at which a firm sells its product and the cost of producing that product. It is a measure of the firm's market power and ability to set prices above its production costs. The price-cost margin is influenced by factors such as the level of competition in the market, the firm's ability to differentiate its product, and the elasticity of demand for the product. A higher price-cost margin indicates that the firm has more market power and can charge a higher price relative to its costs, while a lower margin suggests a more competitive market where firms have less pricing power.