oligopoly usually produce where 3. The Kinked Demand curve Mode Price Answer bas

Question

oligopoly usually produce where 3. The Kinked Demand curve Mode Price Answer based on the graph to the right for one MC1 oligopoly firm in a stable market a. The kinked demand curve shows the firm's perspective when the current market price is te amount at the "kink," at price $ The firm will maximize profit by producing at MC2 t--t--~ -- MC3 quantity 8 b. Suppose the firm currently has ATC2 and MC2 Quantity make an economic profit. It c. From the firm's perspective, if it increases its price, it will lose The graph shows that demand for its products in response to a price increase is (relatively) (will/won't) MR of its customers. (none/some/all) so its total revenue will This is because the firm expects its competitors (increase/decrease/not change) follow them and raise their prices too. (REMINDER: text p. 115 on elasticity and total revenue) (will/won't) d. From the firm's perspective, if it decreases its price, it will gain additional customers. The demand for its products in response to a price decrease is (relatively) , so its elastic/inelastic total revenue will This is because the firm expects its competitors (increase/decrease/not change) follow them and lower their prices too. (will/won't)

Explanation / Answer

Price = $20 , Q = 60 Will Some, elastic, decrease, won’t No, inelastic, decrease, won’t.

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