final economic.docx - In an oligopolistic industry firms...

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In an oligopolistic industry, firms are mutual interdependence, where the profit gained is depending not only on the prices but on the other firms (McConnell et al., 2009). Based on the diagram above, using the profit maximization rule for oligopoly, Apple, Inc should produce output at Q1, and remain the price at P1 regardless of demand or cost. At the intersecting point where marginal cost equal marginal revenue would be most efficient production to award maximize the profit for Apple Inc. The demand curve for Apple is D which has the kink at the existing price P1. Apple’s market demand is elastic above P1 since customers will switch to competitor’s brand such as Samsung galaxy which would remain their price when Apple increase the price of Iphone. In contrast, the Iphone demand is inelastic below P1 as competitors match the price cut and there will be relative small increase in sales but not as much as the company expected. Being one of the two main giants, controlling the smartphone
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