Kinked Demand Curve

According to the kinked demand curve model, if a firm raises its price, what is the likely response of competitors?

• They also raise their prices

• They do not follow the price increase

• They lower their prices

• They exit the market

What shape does the marginal revenue (MR) curve take under the kinked demand model?

• Continuous downward slope

• Horizontal line

• Discontinuous with a gap

• U-shaped

What does price rigidity mean in the kinked demand curve model?

• Firms are unable to change prices

• Prices tend to remain stable

• Prices fluctuate constantly

• Prices are set by the government

Which of the following is NOT a characteristic of an oligopoly?

• Few large firms

• Interdependence

• Price wars are common

• High barriers to entry

Which of the following is an example of non-price competition?

• Discount sales

• Price reductions

• Advertising and branding

• Increasing production