In the kinked-demand model of noncollusive oligopoly,each firm thinks the demand curve below the going price is:
A) more elastic than the demand curve above the going price.
B) less elastic than the demand curve above the going price.
C) more elastic than the marginal revenue curve above the going price.
D) less elastic than the marginal revenue curve above the going price.

Question

Quizplus · Accepted Answer

In the kinked-demand model, firms believe that if they lower prices, competitors will follow, making demand less elastic below the going price.

In the Kinked-Demand Model of Noncollusive Oligopoly,each Firm Thinks the Demand