The Kinked-Demand Curve Model of Oligopoly

question 15

Multiple Choice

The kinked-demand curve model of oligopoly:

• A) suggests a firm's rivals will ignore a price cut but match a price increase.
• B) suggests small changes in unit costs will have no effect on equilibrium price and output.
• C) assumes a firm's rivals will match any price change it may initiate.
• D) assumes a firm's rivals will ignore any price change it may initiate.

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Definitions:

Subtropics

Regions of the Earth immediately adjacent to the tropics, characterized by hot, often humid summers and mild to warm winters.

Loess

An essentially unconsolidated sediment consisting predominantly of silt, interpreted to be windblown dust, commonly of glacial origin.

Ice-Age Glaciers

Massive sheets of ice and snow that covered large parts of the Earth’s surface during the last glacial period, significantly altering the planet's surface and ecosystem.

Rain Shadow

A relatively dry region on the downwind side of a topographic obstacle, usually a mountain range; rainfall is noticeably less than on the windward side.