Use the following to answer questions below :
-Refer to the kinked demand graph. If an oligopolistic firm with constant unit cost equal to $40 faces this demand curve, then the firm will
A) charge $40.00 per unit.
B) charge $50.00 per unit.
C) charge $60.00 per unit.
D) None of the above is correct.

Question

Use the following to answer questions below : 
-Refer to the kinked demand graph. If an oligopolistic firm with constant unit cost equal to $40 faces this demand curve, then the firm will
A) charge $40.00 per unit. 
B) charge $50.00 per unit. 
C) charge $60.00 per unit. 
D) None of the above is correct.

Quizplus · Accepted Answer

In a kinked demand curve model, firms in an oligopoly are likely to charge a price above marginal cost. Given the constant unit cost of $40, the firm will charge a price higher than this, typically at the kink, which is often represented as $60 in such models.

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