ABSTRACT
This chapter discusses the relation between prime costs and prices of an industry under conditions of market imperfection and oligopoly. The entrepreneur may now be imagined to fix his price on the assumption that it is profitable for him to spend a certain percentage of the proceeds σ on prime selling costs. σ may be called the rate of prime selling costs. The position in an "ordinary" boom is different in that bottlenecks in plant and labour are not very significant. True, the supply of basic raw materials is sometimes inelastic and their prices increase considerably in relation to wage rates. The full cost theory in its familiar version maintains that the firm fixes its price by adding to average prime cost the overheads per unit of actual output or per unit of "standard" output and "something" for profit.
