The kinked demand curve model assumes that if a firm raises its price, then its rivals will _____ the price increase, but if a firm lowers its price, its rivals will _____ the price decrease.
A) ignore; ignore
B) match; match
C) ignore; match
D) match; ignore

Question

Quizplus · Accepted Answer

The kinked demand curve model posits that in an oligopolistic market, if a firm raises its price, other firms will not follow suit (ignore the price increase) to keep their prices competitive. However, if a firm lowers its price, other firms will match the price decrease to avoid losing their market share.

The Kinked Demand Curve Model Assumes That If a Firm