One Shortcoming of the Kinked-Demand Curve Model of Oligopoly Is

question 134

Multiple Choice

One shortcoming of the kinked-demand curve model of oligopoly is it does not explain:

• A) why the marginal revenue curve is kinked.
• B) how the going price gets determined in the first place.
• C) what the equilibrium level of profits is for the firm.
• D) why the firm is a least-cost producer.

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Definitions:

Common Resources

Resources that are non-excludable but rivalrous, meaning they are available to everyone, but one person's use diminishes another's ability to use it.

Nonrival in Consumption

A characteristic of some goods where one person's consumption does not reduce the availability of the good for consumption by others.

Nonexcludable

A characteristic of a good or service where it is not possible to prevent people who have not paid for it from having access to it.

Negative Externality

A cost that is suffered by a third party as a result of an economic transaction.