The kinked-demand curve is based upon the assumption that an oligopolist's rivals will:
A) ignore a price cut but follow a price increase.
B) follow both a price cut and a price increase.
C) ignore both a price cut and a price increase.
D) follow a price cut,but ignore a price increase.

Question

Quizplus · Accepted Answer

The kinked-demand curve model assumes that if an oligopolist cuts prices, rivals will follow to maintain their market share, but if the oligopolist raises prices, rivals will not follow, leading to a kink in the demand curve.

The Kinked-Demand Curve Is Based Upon the Assumption That an Oligopolist's