In What Way Does the Theory of the Kinked-Demand Curve

question 51

Multiple Choice

In what way does the theory of the kinked-demand curve explain price stability in an oligopoly industry?

• A)Because if the firm either raises or lowers its price,its total revenue will decrease.
• B)It assumes that rival firms will match any price increase and ignore any price decrease.
• C)It assumes that firms are in collusion with each other.
• D)It assumes that demand is inelastic above the established price and elastic below it.

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