An Essay on Marxian Economics

By Joan Robinson | Go to book overview

CHAPTER IX
IMPERFECT COMPETITION

THE experience of slump conditions in the inter-war period, which gave rise to Mr. Keynes's theory of employment, also led to drastic modifications in the orthodox theory of prices.

The orthodox theory is based upon the assumption of perfect competition. Under perfect competition no individual producer can affect the price of his commodity by altering his rate of output. Each producer is conceived to maximise his profits by producing such a rate of output that marginal cost to him is equal to price -- marginal cost being defined as the addition to total costs caused by a small unit increase in the rate of output. In the short period, with given capital equipment, marginal cost is equal to marginal prime cost -- the addition to outlay on wages, raw materials, power and wear and tear entailed by a small unit addition to output. Thus price, at any moment, is equal to marginal prime cost, and the excess of receipts over total prime costs, which provides for overhead costs and net profits, is equal to marginal minus average prime cost, multiplied by output.

Now, in the general run of manufacturing industry, prime cost begins to rise sharply, as output expands, only when the full capacity output of the plant is approached. It follows that, with perfect competition, any firm which is working at less than full capacity output must be losing the whole of its overhead costs, and can have no motive

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An Essay on Marxian Economics
Table of contents

Table of contents

  • Books by Joan Robinson ii
  • Title Page iii
  • Foreword v
  • Contents ix
  • Chapter I - Introduction 1
  • Chapter II - Definitions 6
  • Chapter III - The Labour Theory of Value 10
  • Appendix - Value in a Socialist Economy 23
  • Chapter IV - The Long-Period Theory Of Employment 29
  • Chapter V - The Falling Rate of Profit 35
  • Chapter VI - Effective Demand 43
  • Chapter VII - The Orthodox Theory of Profit 52
  • Chapter VIII - The General Theory Of Employment 63
  • Chapter IX - Imperfect Competition 73
  • Chapter X - Real and Money Wages 82
  • Chapter XI - Dynamic Analysis 92
  • References to "Capital" 96
  • Index 103
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