OLIGOPOLY (3RD TRY) QUESTION 2 Please answer the following questions rounded to
ID: 1212159 • Letter: O
Question
OLIGOPOLY (3RD TRY)
QUESTION 2
Please answer the following questions rounded to the nearest whole dollar or unit. The graph below shows the demand curve faced by an oligopolistic firm who is a member of a cartel. Use the graph to answer the questions below. Scroll down to see all the questions. 100 60 Price () 40 30 20 10 10 20 30 Quantity (thousands) What is the most likely price agreed upon by the cartel? What is the most likely quantity agreed upon by the cartel? units The perceived demand curve for this oligopolistic firm in a cartel appears kinked because Piease choose one answer( all firms will match price decreases but not price increases, all firms will match price increases but not price decreases, of the prisonerl's dilemma outcome, all firms are acting like perfect competitors) A.) all firms will match price decreases but not price B.) all firms will match price increases but not price C.) of the prisoneri's dilemma outcome increases decreases D) all firms are acting like perfect competitors)Explanation / Answer
Answer to Blank 1: $70
Answer to Blank 2: 15 units
Answer to Blank 3: All firms will match price decreases but not price increases
Explanation: Since the upper portion of the demand curve is more elastic, if the firm slightly increases prices, the demand will fall heavely.So, the firm will not match price increases. Similarly, Since the lower portion of the demand curve is less elastic, if the firm slightly decreases prices, the demand will increase slightly.So, the firm will not match price decrease.
Answer to Question 3:
All firms will match price decreases but not price increases
Explanation: Since the upper portion of the demand curve is more elastic, if the firm slightly increases prices, the demand will fall heavely.So, the firm will not match price increases. Similarly, Since the lower portion of the demand curve is less elastic, if the firm slightly decreases prices, the demand will increase slightly.So, the firm will not match price decrease.
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