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:

Cash Dividend

A cash dividend is a payment made by a company out of its earnings to shareholders in the form of cash.

Stockholders Equity

The residual interest in the assets of a corporation after deducting liabilities, representing ownership value.

Assets

Economic resources owned by a business or individual that are expected to provide future benefits.

Par Value

The face value of a bond or stock as stated by the issuer, which bears importance in the legal capital of a company.