The Theory of Imperfect Competition Profit-maximizing firms set marginal revenue equal to their marginal cost, c This generates a negative relationship between the price and the number of firms in the market which is the pp curve P=C+1/(bxn) (6-10) The more firms there are in the industry, the lower the price each firm will charge Copyright C 2003 Pearson Education, Inc Slide 6-24Copyright © 2003 Pearson Education, Inc. Slide 6-24 – Profit-maximizing firms set marginal revenue equal to their marginal cost, c. – This generates a negative relationship between the price and the number of firms in the market which is the PP curve: P = c + 1/(b x n) (6-10) – The more firms there are in the industry, the lower the price each firm will charge. The Theory of Imperfect Competition