Assume That Five Oligopolists Begin with a Common Price of P

question 133

Multiple Choice

Assume that five oligopolists begin with a common price of p = $15.One of the firms raises its price to $18.What are the other four firms likely to do,based on the theory of the kinked demand curve?

• A)Raise their prices also,but by less than $3
• B)Raise their prices by $3
• C)Keep their prices the same
• D)Lower their prices by less than $3
• E)Lower their prices by $3

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Definitions:

Cost of Goods Sold

Refers to the immediate expenses related to manufacturing products that a business sells.

General and Administrative Costs

Expenses related to the overall administration and management of a business, excluding production and sales costs.

Total Debt Ratio

A financial metric that compares a company's total liabilities to its total assets, indicating what proportion of a company's assets is financed by debt.

Equity Multiplier

A financial ratio indicating the portion of a company's assets that are financed by stockholder's equity.