According to the kinked demand curve model, a firm will assume that rival firms will
A) keep their rates of production constant.
B) keep their prices constant.
C) match price cuts but not price increases.
D) match price increases but not price cuts.

Question

Quizplus · Accepted Answer

The kinked demand curve model suggests that firms in an oligopoly will match price cuts to avoid losing market share but will not match price increases, leading to a kink in the demand curve.

According to the Kinked Demand Curve Model, a Firm Will