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_
Keep practising Monopolistic Competition and Oligopoly
Browse all Monopolistic Competition and Oligopoly questions for AP Microeconomics, or explore more Economics topics.
Related questions
Complete the oligopoly rulesTrue or false: imperfect competitionPerfect competition or oligopoly?Match each oligopoly termStop on the market structureCompared 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: