Please answer the question below based on the graph above The graph below shows

Question

Please answer the question below based on the graph above

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. What is the most likely price agreed upon by the cartel? What is the most likely quantity agreed upon by the cartel? The perceived demand curve for this oligopolistic firm in a cartel appears kinked because: all firms are acting like perfect competitors. all firms will match price decreases but not price increases. of the prisoner's dilemma outcome. all firms will match price increases but not price decreases. Cartels can ensure that members cooperate by which of the following:? There is more than one correct answer. closely monitoring cartel members behavior, signing legally binding agreements, matching all price increases but not cuts, matching all price cuts but not increases.

Explanation / Answer

1. Most likely price = $ 70

Most likely quantity = 15 units

Reason: Equilibrium is at the kink of the demand curve.

2. The correct answer is: b)

Reason: In an oligopoly market, when a firm reduces the price, all firms follow the suit and reduce the price to retain customers whereas when a firm increase the price, none of the firm follow the suit and increase price and thus the firm that has already increased the price suffers losses.

3. The correct answer is: a) and b)

Reason: option c) and d) are incorrect as this will not ensure a cartel; rather may lead to a price war.

Thanks!

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