Use the Following Scenario to Answer the Following Questions

question 31

Multiple Choice

Use the following scenario to answer the following questions:
Kit-N-Sit and Kittysitters are two cat-sitting services in Kent,Ohio.There are no other cat-sitting services,so the market is considered to be a duopoly.
-According to the kinked demand curve theory,if Kit-N-Sit cuts prices,Kittysitters will ________; if Kit-N-Sit raises prices,Kittysitters will ________.

• A) do nothing and leave prices unchanged; do nothing and leave prices unchanged
• B) do nothing and leave prices unchanged; cut prices
• C) do nothing and leave prices unchanged; raise prices
• D) cut prices; do nothing and leave prices unchanged
• E) raise prices; do nothing and leave prices unchanged

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Trust Fund

A fund comprised of a variety of assets intended to provide benefits to an individual or organization.

Effective Rate

is the interest rate on a loan or financial product, restated from the nominal rate as an annual rate that may incorporate compounding.

Endowment Fund

A financial endowment given to institutions like universities, museums, and non-profits to invest and use the annual income from investments for operations or programs.