MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 15.1, Problem 3Q
To determine

The elasticity of demand curve in an oligopolistic market.

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Is monopolistic competition efficient and socially desirable for the welfare of the economy
With a kinked demand curve, can an oligopolist increase revenue by raising or cutting price?  Explain using the concept of elasticity.
Suppose that a monopolistic seller of designer handbags faces the following inverse demand curve: P= 50 – 0.4q. The seller can produce handbags for a constant marginal and average total cost of $10. Calculate the profit-maximizing price for this seller. Now, suppose the government levies a $4 tax per unit on sellers of handbags. Calculate how this tax will affect the price the monopolist charges its customers and who will bear the burden of this tax.
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