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Answer to Question #16476 in Microeconomics for Amit

Question #16476
Suppose the jeans industry is having an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts. Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another
Expert's answer
If the jeans industry is having an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts, then all the firms will have a kinked demand curve, this mean that firms in the jeans industry compete against one another, but their competition is another than competitive industry competition, where all the firms are price-takers.

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Assignment Expert
19.05.16, 16:31

Dear visitor, please use panel for submitting new questions

Ghinwa
19.05.16, 16:28

Suppose the jeans industry is an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts.
Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?
(5 marks for the correct demand curve and 5 marks for the correct explanation)

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