Question 26 According to the kinked demand curve theory of oligopoly, each firm thinks its demand curve at prices below the existing price is a. more elastic than at prices above the existing price since price increases will be matched. b. less elastic than at prices above the existing price since price increases will be matched. c. more elastic than at prices above the existing price since price increases will not be matched. d. less elastic than at prices above the existing price since price increases will not be matched.

9. Refer to the example below. Provide a clear explanation for why an oligopoly faces a kinked demand curve. Price ($) $600 $500 $400 $300 $200 $100 0 0 (5,000, $550) 5,000 (10,000, $500) (11,000, $300) 10,000 Quantity 15,000 20,000

*You only need to answer question C*

(a) There are two companies in the world that produce large passenger aircraft, Boeing, and Airbus. How would you characterize the market for large passenger aircraft, monopoly, perfectly competitive, monopolistically competitive or Oligopoly? Please explain. Large passenger aircraft are defined as aircraft than can carry more than 150 passengers.   (b) The market for telephone services has become more competitive over time with the advancement of technology in the industry. Technology in the aircraft manufacturing industry has also advanced significantly. Why hasn’t this improvement in technology led to an increase in competition (Boeing and Airbus have been the only manufacturers in this industry for many years)? Please explain.