The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .If the supply curve of the fringe SF becomes steeper, which of the following changes will be observed in the oligopoly market?
A)The residual demand curve DRES will become less elastic
B)The dominant firm's profits will decrease
C)The fringe's profit will decrease
D)The dominant firm's market share will decrease

Question

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .If the supply curve of the fringe SF becomes steeper, which of the following changes will be observed in the oligopoly market?

-Refer to Figure .If the supply curve of the fringe SF becomes steeper, which of the following changes will be observed in the oligopoly market?
A)The residual demand curve DRES will become less elastic 
B)The dominant firm's profits will decrease 
C)The fringe's profit will decrease 
D)The dominant firm's market share will decrease

Quizplus · Accepted Answer

When the supply curve of the fringe becomes steeper, it indicates that the fringe suppliers are less responsive to price changes. This makes the residual demand curve for the dominant firm less elastic, as the fringe suppliers are less able to increase supply in response to price changes by the dominant firm.

The Figure Given Below Represents the Total Output and Price