The Kinked-Demand Curve Model Helps to Explain Price Rigidity Because

question 85

Multiple Choice

The kinked-demand curve model helps to explain price rigidity because

• A) there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.
• B) demand is inelastic above and elastic below the going price.
• C) the model assumes firms are engaging in some form of collusion.
• D) the associated marginal revenue curve is perfectly elastic at the going price.

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