An oligopoly is a market structure characterized by a small number of large firms dominating the industry. These firms have significant market power, meaning they can influence prices and output levels. Oligopolies can exist in various industries, such as telecommunications, automobiles, and airlines. In addition, for this market structure, there is significant amount of interdependence, meaning that these firms will monitor each others prices and output and adjust accordingly. One of the models we use to illustrate this interdependence is the Kinked Demand model and Game Theory. You can refer to your textbook for more information on both these theories. Task: 1. Draw a kinked demand model, labeling all appropriate curves and variables (D,MR, MC, Q, P, etc.), when you have finished, explain how your model is used to illustrate interdependence between firms. 2. Below is a game theory matrix. In the matrix, two rival firms can either raise price or lower price. Firm B is assigned the gray "payoffs" while firm A is assigned the tan "payoffs". Use the matrix to answer the following guestions. A, If both firms had no knowledge of the other firm's pricing strategy, how would each firm set their price? Why? B. If firms actively colluded, how would each firm set their price? Why? C. If firms actively colluded, why might this collusion not last? D. Why is collusion good for firms and bad for consumers? FIRM B Raise Lower price price Raise $80m $100m Pric 8om $30m FIRM A T $30m $70m price 100m $70m