In oligopoly, a firm facing a kinked demand curve will seldom wish to change prices.

Question

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A firm facing a kinked demand curve will have a relatively inelastic demand above the current price level and a relatively elastic demand below the current price level. Therefore, a firm is unlikely to change its price because any decrease in price will lead to a substantial decrease in revenue due to the inelastic demand, while any increase in price will lead to a large decrease in demand due to the elastic demand.

In Oligopoly, a Firm Facing a Kinked Demand Curve Will