The Theory of the Kinked Demand Curve Is That

question 176

Multiple Choice

The theory of the kinked demand curve is that

• A)although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm's behavior.
• B)freedom of entry will reduce profits to zero.
• C)a firm's competitors will follow it in a price decrease but not follow it in a price increase.
• D)firms are all seeking the position of joint profit maximization.

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into the amount of finished goods units they represent.

Equivalent Units

A concept in cost accounting used to apportion costs to partially completed goods, expressed in terms of fully completed units.

Direct Labor

The payment for labor of employees directly involved in the generation of goods or the provision of services.

Equivalent Units

A concept used in cost accounting to convert the amount of work done on partially complete goods into a number of fully complete units.