If an Oligopoly Is Faced with a Kinked-Demand Curve That

question 306

Multiple Choice

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above and relatively inelastic below the going price, then it will

• A)increase total revenue by increasing price but lower total revenue by decreasing price.
• B)decrease total revenue by either increasing or decreasing price.
• C)increase total revenue by either increasing or decreasing price.
• D)increase total revenue by decreasing price but lower total revenue by increasing price.

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Definitions:

Differential Cost Analysis

The process of comparing the cost differences between two business decisions in order to determine which is more financially viable.

Traceable

Refers to costs or expenses directly associated with a specific department, product, or project, making it easy to assign them accurately.

Activity-based Costing

A costing methodology that assigns overhead and indirect costs to specific products or activities based on their consumption.

Avoidable Cost

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.