6. Understanding the kinked demand curve modelHappyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (D₁ - D₂) and theresulting marginal revenue curve (MR₁-MR₂). The graph also shows two possible marginal cost curves (MC₁ and MC₂).PRICE(Dollars per ticket)83330527 +24211815129630MR.03D.MR6 9 12 15 18 21 24 27QUANTITY (Millions of tickets per year)30MCMC₂D33 36?Assume Happyland's marginal cost is represented by MC₂. Happyland will set a price ofper ticket.According to the kinked demand curve model, if one firmits price, other firms will do likewise to retain their market share, but if one firmits price, other firms will not follow suit. Therefore, if Happyland increases its price to above the price you just found for Happyland, itscompetitors willThe basic principle behind the kinked demand curve model explains why the D₁ portion of the kinked demand curve is relativelyD₂ portion.If Happyland's marginal cost increased from MC₂ to MC₁ on the graph, Happyland wouldelastic than the

A demand curve shows the connection between the cost of a commodity or service and the volume…

6. Understanding the kinked demand curve model Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (D₁-D₂) and the resulting marginal revenue curve (MR₁-MR₂). The graph also shows two possible marginal cost curves (MC₁ and MC₂).

6. Understanding the kinked demand curve model Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (D₁-D₂) and the resulting marginal revenue curve (MR₁-MR₂). The graph also shows two possible marginal cost curves (MC₁ and MC₂).

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 13CQ

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