The definition of a price maker is a “firm with some power to set price because the demand curve for its output slopes downward,” which in effect, means those firms with downward sloping demand curves have some market-pricing power. All firms potentially have market-pricing power in the short run, but in the long run, only certain firms possess it. How does a firm then maximize its total revenue? Describe the relationship of the demand curve and total revenue, indicating in which of the four types of market structures this market-pricing power would occur (i.e., pure competition, monopolistic competition, oligopoly, monopoly) in the long run?

Significant market pricing power happens when a firm’s marginal profit exceeds the marginal cost and long-run average cost. This is possible either by a) having nearly full control of the entire market or b) creating viable and sustainable barriers to entry for the new firms. For (a), the appropriate market structure is a monopoly which in all practical situations is rare to observe. For (b), the relevant market structure is oligopoly which refers to creating barriers with the help of collusion among some selective big firms in the industry leading to some anti-competitive behaviors including predatory pricing, product tying, or overcapacity.
 
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