Consider the diagram at right, which applies to a firm in an oligopolistic indus
ID: 1161857 • Letter: C
Question
Consider the diagram at right, which applies to a firm in an oligopolistic industry. The shape of the demand curve faced by this oligopolistic firm is the140 result of MC A, the firm expectations that competitors will match price decreases and ignore price increases 100 ? B. the firm expectations that revenue will fall whether it increases or decreases the price. the firm expectation that it will lose significant sales with price increases and gain few sales with price decreases All of the above. 80- ° C. 40- D. 20 If consumers are willing to pay a slightly higher price for this firm's product at any given quantity, so that there is a small upward shift in demand MR 0510 15 20 25 30 Output (units per week) the profit maximizing output level will not change. 0 A, O B. the profit maximizing price will not change. O C. neither the profit maximizing price nor output will change. both the profit maximizing price and output will change. OD,Explanation / Answer
1. A. the firm's expectations that the competitors will match price decreases and ignore price increases.
2. B the profit maximising price will not change.
3. They will produce at the point where the profit is maxium (behaving as a monopolist). This is true when TR is maxium that is at price per unit of $5.
4. At Perfectly competitive price, P=MC=MR =0 (since MC= 0). So the price of gas will be $0.
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