Producers where money is to be made and thus what they ought to be producing

(2) And also the price (pricing) policy of the firms. Pricing policy is the method used by firms for

Determining their prices. In this area, there appears to be a discrepancy between the suggestions of

Theory and the observed practice of firms, (a) In theory, firms in perfect competition take the market

Price as given — which will equal the marginal cost of production — without being able to

Influence that price. A monopoly or any firm in monopolistic competition first determines its

Output and only then sets a price at the level that just sells the output chosen, (b) In practice, firms

appear to use “rules of thumb” rather than accurate assessments of marginal revenue and costs.

Cost-plus pricing, for example, involves charging the average cost of producing an item, plus

A profit margin, the size of which is loosely determined by market conditions.

Much debate on pricing policy has surrounded the appropriate policy for nationalized industries; in

Particular whether they should attempt to emulate the marginal-cost pricing of perfect competition.

International prices are formed within the frames of common commercial transactions. We

differentiate the following prices: public, making-up (settlement), contract and base (basic). Public