Question: In Table below, an oligopolistic firm faces two demand schedules. The current price is given as $185.
Study the table and answer the following questions:
(i) What would the demand curve be under the kinked demand curve hypothesis? Explain.
(ii) Plot the marginal revenue curve corresponding to the kinked demand curve and explain.
(iii) Given that Marginal Cost is $150 at every level of output, copy the table and calculate Marginal Revenue. Determine the profit- maximizing level of output and plot it on the graph.
|
Competitors quantity demands
|
Price
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Competitors follow: quantity demands
|
Total Revenue
Column
1x2
|
Marginal Revenue
(MR)
|
Marginal Cost
(MC)
|
|
20
|
200
|
35
|
4000
|
|
150
|
|
30
|
195
|
40
|
5850
|
|
150
|
|
40
|
190
|
45
|
7600
|
|
150
|
|
50
|
185
|
50
|
9250
|
|
150
|
|
60
|
180
|
55
|
10800
|
|
150
|
|
70
|
175
|
60
|
12250
|
|
150
|