question archive Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut
Subject:MarketingPrice:2.88 Bought3
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:
a. demand curve as being of unit elasticity throughout.
b. supply curve as kinked, being steeper below the going price than above.
c. demand curve as kinked, being steeper below the going price than above.
d. demand curve as kinked, being steeper above the going price than above.
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Option c. demand curve as kinked, being steeper below the going price than above is correct.
The reason behind the correct option is that the competitors in oligopolistic markets imitate the actions of reach others in case of a fall in prices. This happens because they do not want to lose market share.
