Map Sapling Learning Below are the demand curves for ABC Inc, and DEF Inc. ABC s

Question

Map Sapling Learning Below are the demand curves for ABC Inc, and DEF Inc. ABC sells personalized tablets with access to exclusive apps, while DEF sells basic tablet computers. Below are the demand curves faced by each firm. If the current price for ABC's tablets is $259/tablet and management decides to increase the price to $695/tablet, what happens to quantity demanded? Price ABC Inc. 1000 900 O Quantity demanded does not change. 500 400 300 200 Quantity demanded decreases. O O DeandQuantity demanded increases 0 200 400 800 800 1000 Quantity demanded falls to zero. If the current price for DEF's tablets is $200/tablet and management decides to increase the price to $251/tablet, what happens to quantity demanded? Price DEF Inc. 1000 800 800 O Quantity demanded decreases O Quantity demanded does not change. O O Quantity demanded increases 200 Quantity demanded falls to zero. 0 200 400 000 800 1000 Which of the two firms has market powers? O DEF Inc. O Neither O Both O ABC Inc. Previous Check Answer NextExt 9 Hint about us careers privcy policy

Explanation / Answer

a) Current price of ABC tablets = $259/tablet

If ABC increases its price to $695/tablet

We can see from the demand curve of ABC as price increases demand is increasing and it becomes zero at price of $900/tablet

So when price increases from $259/tablet to $695/tablet, quantity demanded will decrease

The answer is option 'b' i.e. 'quantity demanded decreases

b) Current price of DEF's tablets = $200/tablet

We can see from the demand curve that it is a horizontal curve so if price increases then quantity demanded will decrease to zero

So if price of tablet increases to $251/tablet then quantity demanded will decrese to zero

The answer is option 'c' i.e. 'quantity demanded falls to zero

c) ABC has some market power as it sells personalized tablets and we can see from its demand curve that it can control its prices

DEF didnot have any market power as it is selling basic tablet and we can see from its demnad curve that it can't control its price, if it change prices demand will fall to zero

So ABC has market power

Therefore answer is option 'd' i.e ABC Inc.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---