M8A2 Oligopoly Kinked Demand Curve Assignment

Assignment Directions: An oligopolist faces a kinked demand curve. In your own words, describe why firms face this situation?

Theory says that oligopolies should stick to the $500.00 price to maximize revenue (see the graph above).  

Use the graph pictured to calculate total revenue in the elastic and inelastic portions of the demand curve at the price and quantity points specified to explain the theory.