The correct answer is: A. other firms will also reduce their price.
In the kinked demand curve model, a firm’s demand curve is kinked at the current price because firms believe that if they raise their price, their demand will decrease sharply, but if they lower their price, their demand will not increase very much. This is because firms believe that their rivals will match any price decrease, but will not match any price increase.
Therefore, if one firm reduces its price, other firms will also reduce their price in order to maintain their market share. This will lead to a decrease in the price of the product and an increase in the quantity demanded.
Options B and C are incorrect because they do not take into account the kink in the demand curve. If a firm reduces its price, other firms will also reduce their price, but if a firm raises its price, other firms will not follow suit.
Option D is incorrect because it is not always the case that other firms will raise their price if one firm reduces its price. In fact, as explained above, other firms will also reduce their price in order to maintain their market share.