Assume that there are many computer chip manufactures in the market, but Intel has market power (a downward sloping demand and MR curve) and maximizes current profits (rents) given its costs and its demand.

Using the appropriate graph, show how Intel should respond if Dell, a rival firm, first reduces output unilaterally, other things equal.

Help explain your diagram and what it shows, briefly. Give an economic rationale for Intel's actual reaction (reducing chip output).