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COLLUSION AND EFFICIENCY: Colluding oligopolistic firms generally produce less output and charge a higher price than would be the case for a perfectly competitive industry. In essence, colluding oligopolistic firms function just as if a market were monopolized. The price charged by the colluding firms is higher than the marginal cost of production. The equality between price and marginal cost is THE key indication that resources are allocated efficiently and that society's resources are being used to generate the highest possible level of satisfaction. Because the colluding firms control the market like a monopoly, the market demand curve is THE demand curve for the colluding firms's. With a negatively-sloped demand curve, price is greater than marginal revenue. And because a profit-maximizing firm equates marginal revenue with marginal cost, the price charged by the colluding firms when the maximize industry profit is greater than marginal cost.
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PERFECT COMPETITION, REALISM Perfect competition is an idealized market structure that does NOT exist in the real world. While some real world industries might come relatively close to one or two of the four key characteristics of perfect competition, none matches all four sufficiently that they can be declared PERFECTLY competitively. Some industries come close on the large number of small firms and the identical product characteristics. A few industries have relatively good, although not perfect, information about prices and technology. However, almost all industries fall far short of the perfect mobility characteristics.
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The portrait on the quarter is a more accurate likeness of George Washington than that on the dollar bill.
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"I've always believed that if you put in the work, the results will come. I don't do things half-heartedly. Because I know if I do, then I can expect half-hearted results. " -- Michael Jordan, basketball player
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NEDO
National Economic Development Office
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