Sticky Prices Are an Outcome of the Kinked Demand Model

question 4

Multiple Choice

Sticky prices are an outcome of the kinked demand model because:

• A) firms in an oligopoly will collude to hold prices fixed.
• B) marginal costs are constant in oligopolistic industries.
• C) marginal costs can vary to some extent, but firms will have no incentive to change their prices in oligopolistic industries.
• D) demand is perfectly elastic in oligopolistic industries.
• E) firms will set price equal to marginal cost in oligopolistic industries.

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Definitions:

Promoter

An individual or company that helps raise capital, organize, and start a business or event.

Liability

A legal responsibility or obligation, particularly in terms of debts or financial compensation for loss or damage caused by one's actions or inactions.

Preincorporation Contracts

Agreements entered into on behalf of a corporation before it is legally formed, for which the corporation may later assume liability.

Promoter

An individual or company responsible for organizing and financing the initial operations of a business venture or organizing events, often taking significant financial risks.