Question

Sorry if English isn't so good.

Please show me step by step how to solve the following questions

Q3 Assume that the market for computer operating systems has only two providers: Microanalytics, and Worldspeed. Currently, each provider is selling 5000 systems per month, at $5000 each. This is shown in the graph below. Accordingly, each provider is earning $25,000,000 per month. [9] 1What kind of market is this: Perfect competition? Monopoly? Monopolistic competition? Oligopoly? (Circle one.) 2 Assume that Microanalytics decides to independently raise its price to $6000. Will it likely sell 3500 systems, or 4500 systems, or still sell 5000? Circle one. What will its revenue be? 3 Instead of increasing its price, Microanalytics decides to independently lower its price to $4000. Will it likely sell 6000 systems, or 7000 systems? Circle one. What will its revenue be in this case? 4 Instead of acting independently, Microanalytics convinces Worldspeed to both sell their systems at $6000. In this case, Microanalytics (and Worldspeed) will sell 3500 or 4500 (circle one) systems and have revenue of This is called and it is legal/illegal (circle one). 2

Thanks you John.

Answer 1

1) The kind of market is Oligopoly.

Oligopoly is type of market where there are limted sellers and large number of customers. A duopoly is a type of oligopoly where two firms have dominant or exclusive control over a market.

2) Though graph is unclear

I assume that flatter demand curve whose elasticity of demand is greater than 1 it's of Microanalytics.

So Microanalytics assumes to sell independently at $6000, it would like to sell at 3500 less than 5000 .

As consumers with full information about market would prefer to offer $5000 and as price demand elasticity is more than 1. Therefore, little change in price would cause change in quantity demanded greater .

Revenue = 3500*6000 = 21000000

3) If Microanalytics decreases it's prices and prices reduced to $4000 then customers would increase to 7000. Therefore the revenue would be

7000*4000= 28000000

4) If both convinced to sell at $6000 then they would be able to tap market share of 4500 customers because there is system of duoploy system which gives them opportunity to monopolizes their prices to certain extent and gains profit from customers who bind to buy from them and hence they have revenue of

6000*4500 = $27000000 . This is called as Profit Maximizing Prices which is legal.