A major prediction of the kinked-demand curve model is:
A) price stability in oligopolies.
B) price instability in oligopolies.
C) stability of production costs in oligopolies.
D) stable purchasing behavior by consumers over time.

Question

Quizplus · Accepted Answer

The kinked-demand curve model suggests that firms in an oligopoly will face a demand curve that is more elastic for price increases and less elastic for price decreases, leading to price stability as firms are discouraged from changing prices.

A Major Prediction of the Kinked-Demand Curve Model Is