Relevant demand curve when rivals match the price change.

Question

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Answer 1

Question

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

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Unit VI Assignment Instructions: This assignment has two parts. Answer the questions using the charts. Part 1: Firm 1 High Price Low Price High Price 8,8 0,10 Firm 2 Low Price 10,0 3,3 Question: For the above game, identify the Nash Equilibrium. Does Firm 1 have a dominant strategy? If so, what is it? Does Firm 2 have a dominant strategy? If so, what is it? Your response:

Answer 2

Question

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

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Answer 4

Question

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 6

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 7

Chapter 9, Problem 1CACQ

a.

To determine

Relevant demand curve when rivals match the price change.

Answer 8

a.

Expert Solution

Answer to Problem 1CACQ

D₂is the relevant demand curve when the rivals match any change in the price level.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

When the rival firm match the changes in level of price, the demand curve that is inelastic is more relevant. The reason is that in case of inelastic demand, when there is a change in the price level, the percentage of demand of the consumer does not reduce more than the percentage increase in the prices. D₂ is more inelastic than D₁, therefore, it is more relevant.

Answer 13

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 14

b.

To determine

Relevant demand curve when the rivals do not match any price change.

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 15

b.

To determine

Relevant demand curve when the rivals do not match any price change.

Answer 16

b.

Expert Solution

Answer to Problem 1CACQ

D₁is the relevant demand curve when the change in the level of price is not matched by the rival firms.

Answer 17

b.

Expert Solution

Answer 18

b.

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

The elastic demand curve tends to be more relevant when the change in level of price is not matched by the rival firm. Therefore, D₂ is the more relevant demand curve.

Answer 21

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 22

1)

To determine

Price charged by the firm if 20 units are produced.

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 23

1)

To determine

Price charged by the firm if 20 units are produced.

Answer 24

1)

Expert Solution

Answer to Problem 1CACQ

If 20 units are produced, then the price charged is $20.

Answer 25

1)

Expert Solution

Answer 26

1)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

If a firm produces 20 units of output, it faces the lower portion of the demand curve. The lower portion of the demand curve D₂, from the point of kink indicates that the price charged is $20.

Answer 29

Economics Concept Introduction

Introduction:Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 30

2)

To determine

Number of units sold if price is $70.

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 31

2)

To determine

Number of units sold if price is $70.

Answer 32

2)

Expert Solution

Answer to Problem 1CACQ

Zero units are sold when the price is $70.

Answer 33

2)

Expert Solution

Answer 34

2)

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

When the price level of the firm is more than $60, the upper portion of the demand curve is relevant. At that level, the quantity produced is zero.

Answer 37

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 38

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.

Answer 39

3)

To determine

Range in marginal cost when the firm continues to charge a price of $60.

Answer 40

3)

Expert Solution

Answer to Problem 1CACQ

The range of the marginal cost when the firm continues to charge a price of $60 is $20 to $50.

Answer 41

3)

Expert Solution

Answer 42

3)

Expert Solution

Answer 43

Expert Solution

Answer 44

Explanation of Solution

The range at which the changes in the marginal cost does not lead to changes in the profits of the firm is the range where the marginal revenue also remains unchanged. According to the marginal revenue curves of the firms, the profit level remains same when price is changed from $20 to $50.

Answer 45

Economics Concept Introduction

Introduction: Oligopoly can be interpreted as the form of market that involves few big firms. The prices charged by the firms in this type of market are based on the prices charged by the competitors. Oligopolies often results in reduced competition due to price collusion.