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The curve on which competing oligopoly firms match price cuts but not price increases is the:
AAverage cost curve
BMarginal revenue curve
CKinked demand curve
DStraight demand curve
Answer & Solution
Correct answer: C. Kinked demand curve
1. Rivals' expected reactions shape what a firm can gain by moving its price.
2. One example of the pressure these firms can exert on one another is the kinked demand curve.
3. In it, competing oligopoly firms commit to match price cuts, but not price increases.
4. That asymmetry makes both raising and lowering price unattractive.
_Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 10 'Monopolistic Competition and Oligopoly', sections 10.1-10.2_
Related questions
Compared with a cartel, the Boeing and Airbus duopoly is held together by:The prisoner's dilemma applies to oligopoly because firms face a choice between:Monopolistic competition and oligopoly are grouped together because both are:The kinked demand curve makes an oligopolist reluctant to raise price because rivals will:A cartel is unstable because each member firm has an incentive to:Products can be differentiated by physical features, location, intangible qualities and:A cartel agreement aims to produce which level of output?The barrier to entry behind the Boeing and Airbus oligopoly comes from economies of scale