Assume That Four Oligopolists Begin with a Common Price of P

question 132

Multiple Choice

Assume that four oligopolists begin with a common price of p = $20.One of the firms lowers its price to $17.What are the other three firms likely to do,based on the theory of the kinked demand curve?

• A)Lose $3 per unit
• B)Make $3 more per unit than the firm that lowered price
• C)Raise their prices above $20 to make up for the lost volume
• D)Lower their prices to $17 so that they won't lose business to their competitor

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