One of the Implications of the Kinked Demand Curve Model

question 89

True/False

One of the implications of the kinked demand curve model is that even if a firm's costs change by a measurable amount,market price is unlikely to change.This helps explain the price rigidity observed in many oligopolistic markets.

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Definitions:

Input Prices

The costs associated with the purchase of the factors of production, including wages for labor, prices for raw materials, and capital costs.

Average Variable Cost

Average variable cost is the total variable cost divided by the quantity of output produced, showing the cost of producing each unit excluding fixed costs.

Short-Run Marginal Cost

The cost incurred by producing one additional unit of a product in the short term where at least one input is fixed.

Renting

The act of paying for the use of something, typically property, land, or a vehicle, owned by another person or company, over a specific period.