Use the following scenario to answer the following questions:
Kit-N-Sit and Kittysitters are two cat-sitting services in Kent,Ohio.There are no other cat-sitting services,so the market is considered to be a duopoly.
-According to the kinked demand curve theory,if Kit-N-Sit cuts prices,Kittysitters will ________; if Kit-N-Sit raises prices,Kittysitters will ________.
A) do nothing and leave prices unchanged; do nothing and leave prices unchanged
B) do nothing and leave prices unchanged; cut prices
C) do nothing and leave prices unchanged; raise prices
D) cut prices; do nothing and leave prices unchanged
E) raise prices; do nothing and leave prices unchanged

Question

Quizplus · Accepted Answer

According to the kinked demand curve theory, in a duopoly, if one firm cuts prices, the other firm is likely to cut prices to maintain its competitive position. However, if one firm raises prices, the other firm may not follow and instead do nothing, hoping to increase its market share by maintaining a lower price point.

Use the Following Scenario to Answer the Following Questions