Hi, please help! Please provide detail solution of how you get these answers! An

Question

Hi, please help! Please provide detail solution of how you get these answers! Answer the question only in the case you can guarantee to answer them all! Thanks.

Assume Happyland's marginal cost is represented by MC2. Happyland will set a price of ____ per ticket.

According to the kinked demand curve model, if one firm (lowers/raises) its price, other firms will do likewise to retain their market share, but if one firm (raises/lowers) its price, other firms will not follow suit. Therefore, if Happyland decreases its price to below the price you just found for Happyland, its competitors will (keep the price unchanged/increase the price/match the price decrease)

The basic principle behind the kinked demand curve model explains why the D1 portion of the kinked demand curve is relatively (more/less) elastic than the D2 portion.

If Happyland's marginal cost increased from MC2 to MC1 on the graph, Happyland would (not change its price/decrease its price by $6/increase its price by $8/decrease its price by $8)

7. Understanding the kinked demand curve model Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (D1-D2) and the resulting marginal revenue curve (MR1-MR2). The graph also shows two possible marginal cost curves (MC1 and MC2). 48 40 l k1 D 32 24 MC2 Z 16 MC1 MI2 18 QUANTITY (Millions of tickets per year) D2 12 24 30 36

Explanation / Answer

a) The happy land will set its price of $40 per ticket.

b) If one firm "lowers" the price others will follow, but if one firm "raises" the price other firms will not follow. So, if Happy land decreases the price the other firms "will match the price decrease".

c) D1 portion is "more elastic" than the D2 portion. (it is the flatter part compared to other)

d) if the Happyland's marginal cost increased from MC2 to MC1 on the graph, Happyland "would not change the price". (as long as the marginal cost falls between the two portions of the MR curve i.e. the black portion the price will not change.)

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