Exhibit 10-4 Kinked Demand Curves

Exhibit 10-4 Kinked demand curves

In Exhibit 10-4, the exhibit represents a kinked-demand oligopoly model. Suppose the current price is $50. If one firm in the oligopoly now attempts to raise price, all firms will:

A) follow along demand curve D₁.
B) follow along demand curve D₂.
C) ignore this price increase and cause the price-raising firm to move along D₁.
D) ignore this price increase and cause the price-raising firm to move along D₂.