Prices are rigid at the kink of an oligopolist's demand curve because

Question

Quizplus · Accepted Answer

At the kink of an oligopolist's demand curve, the marginal revenue curve is discontinuous. This means that a change in marginal cost in the discontinuous section does not result in a change in the profit-maximizing price and output, as the demand curve remains unchanged. Therefore, prices are rigid at the kink of an oligopolist's demand curve. The other options are not correct because changes in fixed costs and average cost can still affect the profit-maximizing price, and infrequent changes in supply are not directly related to price rigidity at the kink.

Prices Are Rigid at the Kink of an Oligopolist's Demand