[Solved] Which of the Following Statements Is Correct Concerning the Kinked-Demand
Question 67
Multiple Choice
Question 67Which of the following statements is correct concerning the kinked-demand curve variant of oligopoly theory?
A)It assumes that the portion of the demand curve above the kink is elastic and the portion below the kink is inelastic.
B)It assumes that the portion of the demand curve above the kink is inelastic and the portion below the kink is elastic.
C)It assumes that the marginal costs of all firms are the same.
D)It assumes that while the some firms will charge the same price they may produce different outputs.
E)It assumes that while the some firms will produce the same output they will charge different prices.
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- Q62:
-Refer to the graph above to answer this question.What will be the profit maximizing price?
A)P1.
B)P2.
C)P3.
D)P4.
E)P5. - Q63:
-Refer to the graph above to answer this question All of the following statements,except one,are true regarding this firm.Which is the exception?
A)The firm is realizing an economic profit.
B)The firm will be reluctant to increase the price.
C)The firm will pass on any increase in costs by increasing the price.
D)The firm will be reluctant to decrease the price.
E)The present price exceeds the average cost.
- Q64:Faced with a kinked demand curve,what action will an oligopolist take if the costs of production increase? A)Increase the price B)Decrease the price,but only if the demand is elastic. C)Decrease the price,but only if the demand is inelastic. D)Decrease the price but only if it is a big increase in costs. E)Nothing,unless it is a very big increase in costs.
- Q65:Which of the following statements best describes the thinking of a single firm in the kinked-demand curve variant of oligopoly theory? A)If we raise our price our rivals will follow us,and if we lower our price our rivals will simply do nothing. B)If we lower price our rivals will follow us,and if we raise our price our rivals will simply do nothing. C)If we raise our output our rivals will follow us,and if we lower our output our rivals will simply do nothing. D)If we lower our output our rivals will follow us,and if we raise our output our rivals will simply do nothing.
- Q66:Which of the following statements best describes the significance of the kink in the demand curve under this variant of oligopoly theory? A)It proves the existence of collusion. B)It illustrates the only variant that does not assume firm interdependence. C)It illustrates the effect of rival firms each engaging in massive advertising efforts. D)It is the best explanation of how price wars can occur. E)It explains why firms with different marginal costs might nonetheless maximize profits at the same price and output.
- Q68:Which of the following statements is correct for an oligopoly firm with a kinked-demand curve? A)It will increase its total revenue by raising its price but lower it by decreasing its price. B)It will decrease its total revenue by raising its price but raise it by decreasing its price. C)It will increase its total revenue by either raising or lowering its price. D)It will decrease its total revenue by either raising or lowering its price. E)Its total revenue will not change regardless of whether it raises or lowers its price.
- Q69:In what way does the theory of the kinked-demand curve explain price stability in an oligopoly industry? A)Because if the firm either raises or lowers its price,its total revenue will decrease. B)It assumes that rival firms will match any price increase and ignore any price decrease. C)It assumes that firms are in collusion with each other. D)It assumes that demand is inelastic above the established price and elastic below it.
- Q70:In the kinked-demand curve variant of oligopoly theory,what output will the firm produce? A)Where marginal cost equals marginal revenue. B)Where demand is elastic. C)Where demand is inelastic. D)Where marginal cost equals average cost.
- Q71:All of the following except one are valid statements concerning the debate about oligopolies and efficiency.Which is the exception? A)Oligopolies are often very large and this creates an environment that is conducive to research and technological change. B)The barriers to entry in an oligopoly industry encourage research. C)Oligopolies usually achieve productive efficiency. D)Because of the barriers to entry in oligopoly industries,oligopolies are likely to become complacent and lose their competitive edge.
- Q72:Who challenged the fundament assumption of profit maximization? A)John Galbraith. B)George Stigler. C)Adam Smith. D)John Maynard Keynes.
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