Answer to Question #127905 in Microeconomics for Brenda Formin

Question

The kinked-demand schedule that an oligopolist believes confronts the firm is given in the table below. Compute the oligopolist’s total revenue at each of the nine prices, and enter these figures in the table. Also compute marginal revenue for each unit between the nine prices and enter these figures in the table. (4 marks)

Marginal
Quantity Total revenue
Price demanded revenue per unit
$5.80 50 $______
5.60 100 ______ $______
5.40 150 ______ ______
5.20 200 ______ ______
5.00 250 ______ ______
4.80 264 ______ ______
4.60 279 ______ ______
4.40 288 ______ ______
4.20 300 ______ ______

(a) Where is the “kink” in the demand curve? What is the current selling price at that kink and how much output will be demanded?
(b) What is the range of marginal cost that will keep the price set at the kink?

Answer 1

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