question archive The kinked demand curve model of oligopoly predicts that A
The kinked demand curve model of oligopoly predicts that A
Subject:MarketingPrice:2.88 Bought3
The kinked demand curve model of oligopoly predicts that
A. the price a firm sets does not change if there are small changes in the firm's marginal costs.
B. price wars in the industry are common.
C. the prices charged by any of the firms in the industry never change.
D. the price a firm sets does not change if there are large changes in the firm's marginal costs.
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Answer: A
In the kinked demand curve model of oligopoly, marginal revenue faces a vertical gap at the current level of output. The current intersection of marginal revenue and marginal cost occurs in this vertical gap as it is the current level of output. Thus, a small change in marginal cost will likely keep output constant which means the price charged will also be constant since price.
