In a Sweezy Oligopoly (Kinked-demand) model, price stability can exist without collusion in an oligopoly. Two firms "squabble" over a market. In such a model, whenever the price of one firm (Firm-ABC) increases, the other firm's price remained constant. On the other hand, 1.1. whenever the price of Firm-ABC decrease, its rival would reduce the price too to maintain its market share. Suppose that a Firm-ABC's demand curve (and its marginal curve) is represented by the Kinked-demand curve given in the figure below. Also, cost information is provided in the figure: Cost, P ATC /MC 20 18 10 7 5 Deamnd MR 100 200 a. How much output should Firm-ABC produce to maximize its profit? Why? b. At what price should Firm-ABC sell to maximize profit? Why? C. What is the total cost of Firm-ABC when it produces 200 units? [Show your steps]

In a Sweezy Oligopoly (Kinked-demand) model, price stability can exist without collusion in an oligopoly. Two firms "squabble" over a market. In such a model, whenever the price of one firm (Firm-ABC) increases, the other firm's price remained constant. On the other hand, 1.1. whenever the price of Firm-ABC decrease, its rival would reduce the price too to maintain its market share. Suppose that a Firm-ABC's demand curve (and its marginal curve) is represented by the Kinked-demand curve given in the figure below. Also, cost information is provided in the figure: Cost, P ATC /MC 20 18 10 7 5 Deamnd MR 100 200 a. How much output should Firm-ABC produce to maximize its profit? Why? b. At what price should Firm-ABC sell to maximize profit? Why? C. What is the total cost of Firm-ABC when it produces 200 units? [Show your steps]

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

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