Microeconomics and Pricing

In oligopoly markets (especially under the kinked demand curve model), when one firm raises prices, competitors typically do not follow to gain market share. This makes price increases generally unmatched, unlike price cuts which are quickly matched.

Price leadership occurs when one dominant firm sets prices and other firms in the industry follow suit without any formal agreement. This makes it a form of non-collusive oligopoly - there's implicit coordination but no explicit collusion.

Total revenue TR = p × q. From demand q = 200 - 100p, we get p = 2 - q/100. TR = (2 - q/100) × q = 2q - q²/100. Maximum occurs at d(TR)/dq = 2 - q/50 = 0, so q = 100. At this point, marginal revenue is zero.

Since in monopoly market, there is no close substitute of product available, the monopolist may use his monopolistic power in any manner in order to realize maximum revenue. He may also adopt price discrimination. Hence, monopolist's degree of control over price is very large.

When marginal opportunity cost is falling, the production possibility frontier becomes convex to the origin (bowed inward). This indicates increasing returns - each additional unit produced requires giving up less of the other good.

Consumer equilibrium occurs where the budget line (also called price line) is tangent to the highest attainable indifference curve. At this tangency point, the slope of the indifference curve (marginal rate of substitution) equals the slope of the budget line (price ratio), meaning the consumer maximizes satisfaction given the budget constraint.

Penetration pricing is the practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors. So, quantity of a product being made available at a lower price is an example of penetrative price.

Yes, it is the right answer.

Perfect competition is not necessary for cardinal utility theory. Cardinal utility depends more on consumer preferences, satisfaction, etc.

It is correct because low production means low indifference curve.

The statement talks about one company that has increased its prices. Why will the prices of other commodities increase unless the product is monopolistic or of national importance?

All these factors tend to make a monopolistic company lose efficiency and innovation. But this is a very harmful in the sense that some new entrants may overcome entry barriers and pose competition.

Monopolistic markets are characterized by: (1) Price set above marginal cost, (3) Preservation of excess profits (barriers to entry), (4) Absolute product differentiation, and (6) No direct competitors (limited competition). This distinguishes monopolistic competition from perfect competition where price equals marginal cost and competitors are infinite.

Perfect competition requires: many buyers and sellers, homogeneous products, free entry and exit, perfect information, and perfect mobility of factors. Transportation costs are not essential - models can include or exclude them. In reality, transport costs exist but are small enough not to significantly affect competition. The other three listed conditions are fundamental requirements.