Country X has a highly competitive market structure, forcing firms to set prices with an average markup of 10% over costs. Country Y has a less competitive market, allowing firms to maintain an average markup of 25%. Assuming labor productivity is the same in both countries, how would this difference in market competition affect their respective price-setting (PS) curves and the resulting equilibrium real wage?
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Country X has a highly competitive market structure, forcing firms to set prices with an average markup of 10% over costs. Country Y has a less competitive market, allowing firms to maintain an average markup of 25%. Assuming labor productivity is the same in both countries, how would this difference in market competition affect their respective price-setting (PS) curves and the resulting equilibrium real wage?
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