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    marginal cost

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    In exhibit six what is the highest dollar amount to which marginal cost can rise without changing price? Files attached.

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    In exhibit six the highest dollar amount the marginal costs can reach without affecting price is $18. This is because you are dealing with a kinked D curve, and the MC can fluctuate between the area where the marginal revenues slope changes, without affecting price or quantity. Point B represents the highest value in this area: the $18 price level.

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    Solution Summary

    Examples of cartels which have suffered a lot of undercutting due to economic incentives are embedded.