Answered: (a) inelastic over the $21 to $23 price…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 1QCMC

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Question

Suppose that an oligopolistic is charging $21 per unit of output and selling 31 units each day. What is its daily total revenue? Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firmâ€™s sales increased from 31 to 32 units. It also previously raised its price from $21 to $23, rivals ignored the price hike, and the firmâ€™s daily total revenue came in at $482. Which of the following is most logical to conclude? The firmâ€™s demand curve is
(a) inelastic over the $21 to $23 price range,
(b) elastic over the $19 to $21 price range,
(c) a linear(straight) down sloping line, or (d) a curve with a kink in it?

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