In a kinked demand market,whenever one firm decides to lower its price,
A) other firms will automatically follow.
B) none of the other firms will follow.
C) one half of the firms follow and one half of the firms don't follow the price cut.
D) other firms all decide to exit the industry
E) all of the other firms raise their prices.

Question

Quizplus · Accepted Answer

In a kinked demand market, the assumption is that if one firm lowers its price, other firms will automatically follow to maintain their competitive position and market share. This behavior is based on the fear of losing customers to the firm that initiated the price cut.

In a Kinked Demand Market,whenever One Firm Decides to Lower