Figure 11-12

-Figure 11-12 indicates the industry cost and demand conditions for a product produced in an oligopolistic industry.The price of this product is most likely to be

Question

Figure 11-12
 
-Figure 11-12 indicates the industry cost and demand conditions for a product produced in an oligopolistic industry.The price of this product is most likely to be

Quizplus · Accepted Answer

The figure shows an oligopolistic industry with a kinked demand curve. The vertical line at Q indicates the industry's current quantity produced. At this output level, the marginal cost curve intersects the upper part of the demand curve at point P₁, and the lower part of the demand curve at point P₂. The kink in the demand curve suggests that firms are likely to match price cuts but may not match price increases. Therefore, the price of the product is likely to be in the range between P₁ and P₂. Therefore, option D is the best choice.

Figure 11-12 -Figure 11-12 Indicates the Industry Cost and Demand Conditions for and Demand