Consider the graph which illustrates the demand curve faced by an oligopolistic firm who is a member of a cartel
a. What is the most likely price agreed upon by the cartel?
b. What is the most likely quantity agreed upon by the cartel?
c. The perceived demand curve for this oligopolistic firm in a cartel appears kinked because
d. Determine which method or methods are used by c to ensure that members cooperate
Homework Answers
a) Likely price = 70
b) Likely quantity = 15000
c) The demand curve is kinked because a price decrease by one firm is met be a price decrease by the rival firms but a price increase is not.
option(A)
d) The following methods are used by a cartel:
-closely monitoring cartel members behavior
-matching all price cuts but not increases
option(A) and (D)
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