Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product? Explain your reasoning.

When firms in the cartel produce near-identical products, the demand for any individual firm's product is highly sensitive to changes in its price relative to other firms' prices. This is because consumers will switch to other cartel member's products if there is a slight price advantage, considering the products to be near-identical substitutes. In this case, if a firm tries to raise its price, it would lose a significant share of demand to the other cartel members. As a result, the firm's demand curve would be elastic in the segment above the kink (higher price range). Similarly, if any firm lowers its price, the other cartel members would react by reducing their prices to maintain their sales volume, as they also produce near-identical products. This leads to the demand for the original firm's product remaining largely unchanged. Therefore, the firm's demand curve would be inelastic in the segment below the kink (lower price range). So, the kinked demand curve becomes more extreme, like a right angle, when each firm in the cartel produces a near-identical product like OPEC and petroleum.

When firms in the cartel produce somewhat different products, the demand for an individual firm's product is less sensitive to changes in price relative to other firms' products. This is because the products are not perfect substitutes for each other, and consumers might prefer specific firms' products due to product differentiation. In this case, the demand curve response to price changes would be less pronounced. If a firm raises its price, the decrease in demand would be less pronounced than in the case of near-identical products. Consequently, the demand curve above the kink (higher price range) would be less elastic. Similarly, if a firm lowers its price, the increase in demand might not be very drastic, because of product differentiation and other factors like brand loyalty. As a result, the demand curve below the kink (lower price range) would also be less inelastic. So, the kinked demand curve becomes less extreme, like a normal demand curve, when each firm in the cartel produces a somewhat different product.