Diagrams

Question 1

F&D
Firm engages in price differentiation.
Profits increase from Sub-normal profits to supernormal profits

Answer 1

MR AR curve shifts outwards
AC above AR —> AR above MR

Question 2

F&D
R&D to improve process innovation
Increase dependence on tech ~> decrease dependence on labour ~> cut costs on paying labour wages

Answer 2

Since its a fall in COP, both MC and AC shift
Downwards shift of MCAC curve to show from subnormal to supernormal profits

Question 3

F&D
Figure showing tacit collusion (price leadership) in oligopolistic firms

Answer 3

Diagram has only MC, AR and DD. No AC.
MR and DD is MR (leader) and DD (leader)
Dd(market) is above DD(leader)

Question 4

F&D
Diagram to show price rigidity in oligopolistic firms

Answer 4

Kinked demand curve

Question 5

F&D
Diagram to show formal collusion in oligopolistic firms (cartel)

Answer 5

Diagram only has MR DD MC
Industry MR
Industry DD= industry
Industry MC