Question

Beyond the nature of the​ market, demand, and the​ economy, what other factors in a​ firm's external environment must a company consider when setting​ prices?

Answer 1

When setting prices, firms must consider factors such as market structure, changes in supply, and production and cost conditions.

Step-by-step explanation:

Setting prices involves considering factors beyond the nature of the market, demand, and the economy. Other factors in a firm's external environment that must be considered include:

1. Market Structure: This concept involves how competitive the industry is. Factors to consider include the market power of each firm in the industry, the similarity of each firm's product to others in the industry, and the difficulty for new firms to enter the industry.
2. Changes in Supply: Factors such as changes in the cost of inputs, natural disasters, new technologies, and government decisions can impact the cost of production and, in turn, how much firms are willing to supply at any given price.
3. Production and Cost Conditions: The answers to questions about what products to produce, how to produce them, how much output to produce, and how much labor to employ depend on the production and cost conditions facing each firm.