What are the assumptions of the kinked demand curve model? What is its main conclusion about oligopoly behavior?
What will be an ideal response?
The model has two main assumptions: The firm believes that rivals will match a price cut, and the firm believes that rivals will ignore a price increase. The result is that demand is much more elastic above the current price (because sales volume will drop off quickly if rivals do not match a price increase), and fairly inelastic below the current price (rivals will cut price to prevent the firm from increasing market share). The main conclusion of the model is that oligopolists will tend to stick to their current prices unless there is a dramatic shift in demand and/or cost.
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A) The job description B) The degree obtained by the applicant C) The letter of appointment D) An announcement of vacancy
When the inflation rate is expected to increase, the ________ for bonds falls, while the ________ curve shifts to the right, everything else held constant
A) demand; demand B) demand; supply C) supply; demand D) supply; supply
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A. production function B. supply curve C. supply function D. production possibilities curve
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Indicate whether the statement is true or false