If Output Is Set at the Kink of the Kinked-Demand

question 211

Multiple Choice

If output is set at the kink of the kinked-demand model, then there

• A)is a strong incentive for rivals to decrease prices.
• B)is a strong incentive for rivals to increase prices.
• C)is one price at which marginal revenue equals marginal cost.
• D)are several prices at which marginal revenue equals marginal cost.

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Definitions:

Common Stock Split

A division of a company's existing shares into multiple ones to boost the liquidity of the shares, making them more affordable to small investors without altering the shareholder's equity.

Return on Equity

A financial ratio calculated by dividing net income by shareholder equity, used to measure the profitability of a company in generating profit from its equity investments.

Debt-to-Equity Ratio

This ratio measures the mix of shareholders' equity to debt in financing a company's assets.