The marginal revenue curve associated with the kinked demand curve is vertical at the current market price.

Question

Quizplus · Accepted Answer

The marginal revenue curve is vertical at the kink point because the demand curve is discontinuous at that point. At prices above the kink point, the demand curve is more elastic, so the marginal revenue curve is downward sloping. At prices below the kink point, the demand curve is less elastic, so the marginal revenue curve is upward sloping.

The Marginal Revenue Curve Associated with the Kinked Demand Curve