Which of the following statements best describes the significance of the kink in the demand curve under this variant of oligopoly theory?

Question

Quizplus · Accepted Answer

The kink in the demand curve under this variant of oligopoly theory explains why firms with different marginal costs might nonetheless maximize profits at the same price and output. This is because if one firm were to lower its price, it would only capture a limited amount of market share due to the kink in the demand curve. Therefore, other firms would not have an incentive to lower their prices in response, leading to a situation where firms with different marginal costs can still charge the same price and achieve maximum profits.

Which of the Following Statements Best Describes the Significance of the Kink