(Solved): 12.6 6. Understanding the kinked demand curve model Happyland is one of five amusement parks on Suns ...

6. Understanding the kinked demand curve model Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (D-D?) and the resulting marginal revenue curve (MR: - MR?). The graph also shows two possible marginal cost curves (MC) and MC?). PRICE (Dollars per ticket) 48 32*##*22D 44 40 20 24 20 16 12 B 4 0 O MR? 4 B MR MC QUANTITY (Millions of tickets per year) MC, 10 12 14 10 18 20 22 24 Assume Happyland's marginal cost is represented by MC1. Happyland will set a price of per ticket. . its price, its price, other firms will not follow suit, but if one firm According to the kinked demand curve model, if one firm other firms will do likewise to retain their market share. Therefore, if Happyland increases its price to above the price you just found for Happyland, its competitors will The basic principle behind the kinked demand curve model explains why the D? portion of the kinked demand curve is relatively elastic than the D? portion. If Happyland's marginal cost decreased from MC, to MC? on the graph, Happyland would Grade It Now Save & Continue Cestinus de