In the dominant firm model of oligopoly, the dominant firm faces a

A. horizontal non-kinked demand curve.

B. horizontal kinked demand curve.

C. kinked demand curve with a negative slope.

D. non-kinked demand curve with a negative slope.

• The correct option is D. Non-kinked demand curve with a negative slope.

In the oligopoly model of the dominant firm, there is a single largest firm in the market that holds the majority of the total sales for a particular product/service in the market. However, smaller firms can contribute to the remainder of the market share. Besides this, the largest firm has the authority to determine both the market price and market quantity supplied by themselves and the smaller firms take that as given. Thus, in this case, the demand curve faced by the largest or dominant firm is non-kinked with a negative slope.