Economics (AS & A Level) · Oct / Nov 2021 · Paper 33 · Question 11

The diagram shows the marginal cost (MC), marginal revenue (MR), average revenue (AR) and average total cost (ATC) curves of a profit-maximising firm in an oligopolistic market. What is the reason why the oligopolist would not want to increase their price above P?

1. ADemand is relatively elastic, meaning the firm would see a reduction in total revenue.
2. BDemand is relatively elastic, meaning the firm would see an increase in total revenue.
3. CDemand is relatively inelastic, meaning the firm would see a reduction in total revenue.
4. DDemand is relatively inelastic, meaning the firm would see an increase in total revenue.

As printed in the paper