Oligopoly analysis - revenue curve segments DE and ED 1...

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Oligopoly analysis Oligopoly analysis has been carried out exclusively in terms of demand or average revenue curve. So long as oligopolists find the average revenue higher than the average cost of producing equilibrium output, they will make profits. Any reference to the marginal cost of a firm is not necessary in such an analysis. Therefore it is also called Full Cost ( not marginal cost) Oligopoly Equilibrium Solution . Even if we desire to bring in the marginal revenue and the marginal cost curves into the discussion that does not alter the equilibrium attainment of the firm. This can be seen in Figure 47. We have two marginal revenue curves MR and MR 1 corresponding to the average
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Unformatted text preview: revenue curve segments DE and ED 1 respectively. The two marginal revenue curves are broken and the broken portion is along the vertical line EQ. Marginal cost curve of the firm passes from the broken portion of the marginal revenue curve. The equality between MR=MC is also fulfilled for the same output level Q and price P. The Kinked demand curve appears to be satisfactory in every respect. However, the Kinked demand curve solution has also come under some criticism. Sweezy's behavioral assumptions are doubted. Once the Kink position is known the rest of the analysis follows; however, how to determine the Kink is not stated....
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This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Oligopoly analysis - revenue curve segments DE and ED 1...

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