The figure above shows the market demand curve for a market with ...

[ghost!]

The figure above shows the market demand curve for a market with three firms. It also shows a firm's marginal cost curve. In this oligopoly, what is the range of output and prices? Why does this range of outcomes exist?
 
  What will be an ideal response?

Question 2

Refer to the figure above. The loss in consumer surplus due to the imposition of the tax is given by the areas ________.
 
  A) JBIE and BIA
  B) EAG AND GHF
  C) CAE AND EAHF
  D) JBHF AND ABH

[Brenm]

Answer to Question 1

If the firms operate as a monopoly, they produce a total of 200 units per day and set a price of 12 per unit. If the firms compete and operate as perfect competitors, they produce 400 units per day and the price is 4 per unit. The range of possible outcomes exists because firms in oligopoly have the choice of colluding to decrease output to monopoly levels or cheating on the cartel and increase output to its efficient level. A range of prices also exists between the monopoly price and the perfectly competitive price.

Answer to Question 2

A