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Author Question: Why is it difficult for an oligopolist to determine its profit-maximizing price and ... (Read 39 times)

charchew

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on: Jun 30, 2018
Why is it difficult for an oligopolist to determine its profit-maximizing price and output?

Question 2

Risk-averse people cut their risks by:
 a. diversifying their wealth into physical assets.
  b. investing their wealth into similar kinds of assets.
  c. investing their wealth only in risk-free assets.
  d. diversifying their wealth into different assets.


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cpetit11

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Reply #1 on: Jun 30, 2018
Answer to Question 1

It is difficult to predict how firms will react in situations of mutual interdependence. No firm knows what its demand curve looks like with any degree of certainty, and therefore it has a limited knowledge of its marginal revenue curve. To know anything about its demand curve, the firm must know how other firms will react to its prices and other policies. In the absence of additional assumptions, then, equating marginal revenue and expected marginal cost is relegated to guesswork. Thus, it is difficult for an oligopolist to determine its profit-maximizing price and output.

Answer to Question 2

D


charchew

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Reply 2 on: Jun 30, 2018
YES! Correct, THANKS for helping me on my review

marict

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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