In a duopoly, each firm faces:
A) a more elastic demand curve if it raises its price.
B) a more elastic demand curve if it lowers its price.
C) a perfectly elastic demand curve.
D) a perfectly inelastic demand curved.

Question

Quizplus · Accepted Answer

In a duopoly, there are only two firms that control the market. Each firm's demand will be affected by the price of the other firm. If one firm raises its price, customers will switch to the other firm, making the demand for the first firm's product more elastic. Therefore, each firm faces a more elastic demand curve if it lowers its price, making B the correct answer.

In a Duopoly, Each Firm Faces