In 1988, Canadian government enacted the “Truck Transportation Act, 1988” which effectively deregulated the trucking industry and lowered the barrier for non-trucking companies to enter the industry. In 1991, Canada suffered an Economic recession. Show in a chart with proper labels, how the supply curve of the Canadian trucking industry reacts to different economic cycles? (5 points) Please explain why the supply curve of the trucking industry is “kinked”.

Answer:

- The Canadian trucking business was confronting a resurgence of predatory pricing

- In 1988, Many transporters were moving merchandise for not exactly their variable expenses so as to take out other players competing from the business.

- Predatory pricing in Canada is esteemed illicit however charges of uncalled for pricing rehearses are very hard to demonstrate in court.

- Regardless predatory pricing was.

- Businesses were not able to single out any one organization. It's actually a result of the commercial center, where each transporter was scrambling for piece of the overall industry. Predatory pricing appears to go in waves, however a few people are more dynamic than others.

- This oligopolistic pricing strategy results in a kinked demand curve, with the two segments representing the different competitor reactions to price changes.

- The kink in the demand curve also yields a discontinuous marginal revenue structure, with one part associated with the price increase segment of demand and the other relating to the price decrease segment

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