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:

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between the risk of an investment and its expected return.

Beta

An indicator of how much a stock or portfolio fluctuates in comparison to the general market, signifying its associated risk level.

Betas

A measure of a stock's volatility in relation to the overall market, indicating its risk compared to the market.

Regress

In statistics, the method of predicting the value of a dependent variable based on the value(s) of one or more independent variables.