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rses.aplia.com/af/servlet/quiz?ctx-Mblaisde-0145&quiz; action-takeQuiz&quiz;_probGuid-ONAPCOA80101000000416 2. Demand in monopolistic and competitive markets Aa Aa The biggest difference between Microsoft and software retailers is the market structure in which they operate. In 2007 Microsoft had a monopoly on the Vista operating system (though admittedly it did not have a complete monopoly on operating systems in general), while companies like Best Buy operate in a competitive market, competing with each other and with hundreds of other stores. For simplicity, let's think of Best Buy as being a representative store. Suppose Microsoft initially sold the basic version of Vista to retailers such as Best Buy for $190 per copy. If Microsoft had raised that price to $290, which of the following would you expect to have happened? O Retailers would cancel all their orders of Vista. O Retailers would not change the number of copies of Vista they order from Microsoft. O Retailers would reduce the number of copies of Vista they order from Microsoft. O Retailers would increase the number of copies of Vista they order from Microsoft. Initially, suppose all retailers sold the basic version of Vista for $200. Suppose Best Buy then raised the price at which it sells Vista to $300, but the rest of the retailers were to keep their prices the same. Which of the following would happen? (Assume customers are perfectly informed about prices, and that they can just as easily go to any store.) O More people would buy Vista from Best Buy. O Most people who would have bought Vista from Best Buy will continue to do so. O It would have no effect on sales; the same number of people would buy Vista from Best Buy as if the price hadn't changed. Few, if any, consumers would buy Vista from Best Buy. O The following graph shows different kinds of demand curves.Explanation / Answer
a) As Microsoft is a monopoly if it increases the price the demand will come down and "retailers will reduce the copy of vistas they ordered from Microsoft."
The increase in the price will reduce the demand for the product.
b) f best buy alone increase the cost then "few, if any, a consumer would buy vista form the Best Buy. "
c) Demand curves which Microsoft faces are Demand 2 and the demand curve which the best buy face is Demand 3.
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