An increase in marginal cost that remains within the gap of the marginal revenue curve of a kinked demand oligopolist will:

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The kinked demand curve assumption in oligopoly suggests that firms will only increase prices if their marginal cost rises above a certain threshold as competitors will not follow the price increase if it is not based on cost increases. Therefore, if the marginal cost increases but remains within the gap of the marginal revenue curve, the firm will likely maintain the same price and output level as before. This is because increasing price could lead to losing market share to competitors who can undercut the price, while decreasing output would not lead to a significant increase in price as competitors would simply increase their own output to fill the gap. Thus, the best choice is A, keep price and output the same.

An Increase in Marginal Cost That Remains Within the Gap