Describe the effect of rising costs in an oligopolistic market on the price paid by consumers.

Expert Solution

Answer : In oligopolistic market the demand curve is kinked. In case of kinked demand curve the marginal revenue curve is discontinuous at certain portion. In oligopolistic market at profit-maximizing output level, marginal revenue = marginal cost and at that output level price = demand. If marginal cost curve intersect the marginal revenue curve at it's discontinuous portion then the profit-maximizing output level and price level does not change. There occur no effect on price if cost rise or fall. But if the marginal cost curve intersect the marginal revenue curve except it's discontinuous portion then the profit maximizing-output level and price level will change. So, in oligopolistic market the consumers's paid price level depends on the intersection point of marginal cost curve and marginal revenue curve curve. When cost rise then the marginal cost rise. If marginal cost curve intersect the marginal revenue curve at it's discontinuous portion then the consumers's paid price level does not change when price rise. But if marginal cost curve intersect the marginal revenue curve above it's discontinuous portion then the consumers's paid price level will increase if cost rise.

Rahul Sunny answered 1 year ago

list and describe 4 characteristics of an oligopolistic market structure

describe the various ways in which firms within oligopolistic market structure exercise their market power answer...

describe the various ways in which firms within oligopolistic market structure exercise their market power answer with your own word ( 200 words )

Write up a critical overview of the Acai market in Brazil and how the rising price,...

Write up a critical overview of the Acai market in Brazil and how the rising price, supported by appropriate diagrams/models, has impacted on the economic welfare of both local consumers and producers. You are expected to provide and discuss two intervention strategies as part of the government’s economic policy strategy to curb the rising price of Acai.

What is the predicted effect of this on the price and quantity in the market for...

What is the predicted effect of this on the price and quantity in the market for cleaning services?

Examine Apple Describe the firm’s technology, costs, whether the firm is competitive, oligopolistic, or monopolistic. Also...

Examine Apple Describe the firm’s technology, costs, whether the firm is competitive, oligopolistic, or monopolistic. Also explain how those factors influence the firm’s price and output. Discuss in terms of supply and demand, elasticity, efficiency, price discrimination, strategic interaction, or other economic concepts. Furthermore, determine whether the business should produce more of their good or service or if it should focus on cutting costs and if it should consolidate its locations or spread out.

6 The costs of a market activity paid for by an individual NOT engaged in the...

6 The costs of a market activity paid for by an individual NOT engaged in the market activity are ________ costs. a. External d. social b. Internal e. common c. free-rider 7. An external cost is best defined as the cost of an activity paid for by a. the individual who is engaged in the activity. b. the government. c. a third party. d. a free-rider. e. the individual and the third party. 4. The personal decisions of consumers and...

A firm sells Gizmos to consumers at a price of $87 per unit. The costs to...

A firm sells Gizmos to consumers at a price of $87 per unit. The costs to produce Gizmos is $30 per unit. The company will sell 14,000 Gizmos to consumers each year. The fixed costs incurred each year will be $140,000. There is an initial investment to produce the goods of $2,400,000 which will be depreciated straight line over 5 year life of the investment to a salvage value of $0. The opportunity cost of capital is 9% and the...

If the government removes a binding price floor from a market, then the price paid by...

If the government removes a binding price floor from a market, then the price paid by buyers will increase, and the quantity sold in the market will increase. increase, and the quantity sold in the market will decrease. decrease, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will decrease. Under rent control, bribery is a mechanism to bring the total price of an apartment (including the bribe) closer to the equilibrium...

The market for computers is characterized by perfect competition. Firms and consumers are price takers and...

The market for computers is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. All firms are identical in terms of their technological capabilities. Thus the cost function as given below for a representative firm can be assumed to be the cost function faced by each firm in the industry. The total cost function for the representative firm is given by the following...

(a) A market has a Herfindahl index of 3100. Is this market competitive, moderately oligopolistic or...

(a) A market has a Herfindahl index of 3100. Is this market competitive, moderately oligopolistic or highly oligopolistic? (b) According to the kinked demand curve model, will firms engage in price competition or nonprice competition? (c) Is the price leadership model a model of tacit collusion or explicit collusion? (d) In the Cournot model, do firms produce standardized or differentiated products? (e) Are cartels most successful if they are producing standardized or differentiated products?

Question