Refer to the Graph Shown

question 62

Multiple Choice

Refer to the graph shown. If a firm operating as if it were faced with a kinked demand curve believes that if it raises price from P₂ to P₁, its rival will not go along, then:

• A)the demand curve used by the firm for decision making is highly inelastic.
• B)it probably won't raise price, since doing so would cause sales to drop from Q₃ to Q₁.
• C)it probably will raise price, since lower output means lower costs and greater profit.
• D)D₂ is the relevant demand curve.

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Definitions:

Foreign Language

A language that is not the native language of the speaker, but that is used in the area where they are living or is commonly studied as a second language.

Memory Fade

The loss or weakening of memory over time, often due to the aging process or lack of mental stimulation.

Levels-Of-Processing Principle

A theory in cognitive psychology suggesting that the depth (shallow to deep) of mental processing affects memory recall, with deeper levels of processing leading to longer-lasting memory retention.

Retroactive Interference

The process by which new information impairs the retrieval of previously learned information.