Asked by
Rylie Rygiel
on Oct 12, 2024
Verified
Assume that four oligopolists begin with a common price of p = $20.One of the firms lowers its price to $17.What are the other three firms likely to do,based on the theory of the kinked demand curve?
A) Lose $3 per unit
B) Make $3 more per unit than the firm that lowered price
C) Raise their prices above $20 to make up for the lost volume
D) Lower their prices to $17 so that they won't lose business to their competitor
Kinked Demand Curve
A demand curve that has a distinct bend or kink, typically used in oligopoly models, suggesting that a firm will face different elasticities for price increases versus price decreases.
Lower Prices
A decrease in the cost of goods or services, often resulting in increased demand or consumer purchasing power.
- Learn about the concept and implications associated with the kinked demand curve in oligopoly market settings.
- Scrutinize the influences on corporate strategies related to pricing and output within oligopolistic market frameworks.
Verified Answer
AK
Learning Objectives
- Learn about the concept and implications associated with the kinked demand curve in oligopoly market settings.
- Scrutinize the influences on corporate strategies related to pricing and output within oligopolistic market frameworks.