Asked by
Morgan Heideman
on Nov 26, 2024Verified
If an oligopoly is faced with a kinked-demand curve that is relatively elastic above and relatively inelastic below the going price, then it will
A) increase total revenue by increasing price but lower total revenue by decreasing price.
B) decrease total revenue by either increasing or decreasing price.
C) increase total revenue by either increasing or decreasing price.
D) increase total revenue by decreasing price but lower total revenue by increasing price.
Kinked-demand Curve
A demand curve that has a distinct bend or kink at a certain price level, often used to describe oligopolistic markets where firms face a different elasticity of demand for price increases versus price decreases.
Relatively Elastic
Describes a situation where the quantity demanded or supplied of a good or service changes significantly due to a small change in price.
Relatively Inelastic
This term describes a situation where the demand for a good or service changes by a smaller percentage than the changes in price, indicating that consumers are less sensitive to price changes.
- Comprehend the kinked-demand curve model and its implications for pricing and output decisions.
Verified Answer
SG
Learning Objectives
- Comprehend the kinked-demand curve model and its implications for pricing and output decisions.