If a firm is producing at the kink in its demand curve and it decides to increase its price,according to the kinked demand model
A)It will gain market share.
B)It will lose market share to the firms that do not follow the price increase.
C)Its market share will not be affected.
D)It will not gain market share but will definitely increase profits.

Question

Quizplus · Accepted Answer

According to the kinked demand model, if a firm increases its price while operating at the kink in its demand curve, it will lose market share to competitors who do not follow the price increase. This is because customers will switch to cheaper alternatives offered by competitors, leading to a decrease in the firm's market share.

If a Firm Is Producing at the Kink in Its