If an oligopolist is faced with a marginal revenue curve that has a gap in it,we may assume that:
A)it is colluding with its rivals to maximize joint profits
B)its demand curve is kinked
C)it is selling a standardized product
D)it is selling a differentiated product
E)it is the price leader in the industry

Question

Quizplus · Accepted Answer

A gap in the marginal revenue curve is a characteristic of the kinked demand curve hypothesis, which suggests that rival firms will match a price increase but not a price decrease, resulting in a gap in the marginal revenue curve. Thus, the oligopolist is facing a kinked demand curve.

If an Oligopolist Is Faced with a Marginal Revenue Curve