question archive In the kinked demand curve model, if one firm increases its price, other firms will: a) reduce their price
In the kinked demand curve model, if one firm increases its price, other firms will: a) reduce their price
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In the kinked demand curve model, if one firm increases its price, other firms will:
a) reduce their price.
b) compete on a non-price basis.
c) raise their price.
d) maintain their price constant.
e) wage a price war.
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- In the kinked demand curve model, if one firm increases its price, other firms will d) maintain their price constant.
The kinked demand curve is observed widely in the oligopoly market structure. The kinked demand curve is the result of profit-making and rational thinking of the sellers in the market. The sellers aim at increasing their profits by attracting more buyers by charging low prices. Increased prices will not be followed by the firm as they will lose shares. Therefore the demand curve is kinked shaped.
