Refer to the Diagram for a Non-Collusive Oligopolist

question 40

Multiple Choice

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, the firm's marginal revenue curve will be (moving from left to right)

• A)D₁ ED₂.
• B)MR₂abMR₁
• C)MR₂aMR₂
• D)MR₁ bMR₁.

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Definitions:

Competitive Equilibrium

A market state where supply equals demand, resulting in an efficient distribution of goods and services without excess.

Price Ceiling

A government-imposed limit on the price charged for a product, intended to protect consumers from high prices.

Marginal Cost

The additional cost incurred in producing one more unit of a good or service.

Comparative Advantage

Comparative advantage occurs when a country, individual, or company can produce a good or service at a lower opportunity cost than others.