Kinked-Demand Theory
The kinked-demand schedule that an oligopolist believes confronts the firm is given in the table below. Compute the oligopolist's total revenue at each of the nine prices, and enter these figures in the table. Also compute marginal revenue for each unit between the nine prices and enter these figures in the table.
|
price
|
Quantity demanded
|
TR
|
MR
|
|
5.8
|
50
|
|
|
|
5.6
|
100
|
|
|
|
5.4
|
150
|
|
|
|
5.2
|
200
|
|
|
|
5
|
250
|
|
|
|
4.8
|
264
|
|
|
|
4.6
|
279
|
|
|
|
4.4
|
288
|
|
|
|
4.2
|
300
|
|
|
(a)Where is the "kink" in the demand curve? What is the current selling price at that kink and how much output will be demanded?
(b)What is the range of marginal cost that will keep the price set at the kink?