NightFox
Wildling
The lesson, companies don't base their prices on costs. They base them on demand. They charge the highest price the market will bear.
IMHO Yes and no, the price point on the left end of the supply curve is determined by costs, at that point market supply equals zero (since suppliers in a normal market (outside of dumping) aren't going to supply a non-zero quantity at a loss) market equilibrium price is determined by both supply AND demand (dictated by marginal diminishing returns on both curves), so increasing costs of production (by adding things like taxes, regulation, labor price floors, etc..,) will shift the supply curve to the left and thus have a direct impact on the market equilibrium price point (i.e. where the supply and demand curves intersect).
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