Assume an oligopolist confronts two possible demand curves for its own output, as illustrated here. The first (A) prevails if other oligopolists don’t match price changes. The second (B)

prevails if rivals do match price changes.

0 2 4 6 8 10 12 14 16 18 20 1

3 5

7 9

11 13 15 17

$19 QUANTITY (units per period)

PRICE (dollars per unit)

Demand A Demand B

(a) By how much does quantity demanded increase if the price is reduced from $11 to $9 and

(i) Rivals match the price cut?

(ii) Rivals don’t match the price cut?

(b) By how much does quantity demanded change when the price is raised from $11 to $13 and

(i) Rivals match the price hike?

(ii) Rivals don’t match the price hike?