[amp_mcq option1=”Kinked curve of oligopoly” option2=”Price rigidity curve” option3=”Demand curve for duopoly” option4=”None of the above” correct=”option1″]<\/p>\n
The correct answer is: A. Kinked curve of oligopoly.<\/p>\n
A kinked demand curve is a theoretical concept that explains how a firm in an oligopolistic market may behave. The curve is kinked at the current price, with the demand for the firm’s product being relatively elastic below the kink and relatively inelastic above the kink. This means that if the firm were to raise its price, it would lose a lot of sales to its competitors, but if it were to lower its price, it would not gain many additional sales. As a result, the firm is likely to keep its price at the current level.<\/p>\n
The kinked demand curve is a result of the interdependence of firms in an oligopolistic market. If one firm were to raise its price, its competitors would likely follow suit, as they would not want to lose market share. However, if one firm were to lower its price, its competitors would not likely follow suit, as they would not want to lose money. As a result, the firm that lowers its price would gain market share, but it would not be able to increase its profits significantly.<\/p>\n
The kinked demand curve is a useful tool for understanding how firms in an oligopolistic market behave. However, it is important to note that it is a theoretical concept, and it may not always accurately reflect the behavior of firms in real-world oligopolistic markets.<\/p>\n
The other options are incorrect because they do not accurately describe the kinked demand curve. Option B, price rigidity curve, is a term used to describe a situation in which prices are slow to change. This can happen for a variety of reasons, such as sticky wages or the presence of long-term contracts. Option C, demand curve for duopoly, is a curve that shows the relationship between the price of a good and the quantity demanded by consumers when there are only two firms in the market. Option D, none of the above, is the correct answer if the question is not about the kinked demand curve.<\/p>\n","protected":false},"excerpt":{"rendered":"
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