CA Foundation P4 · Chapter 4 · Question 12 of 15
The kinked demand curve model of oligopoly is used mainly to explain:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Price rigidity in oligopolistic markets
Explanation
Sweezy's kinked demand curve assumes rivals match price cuts but ignore price increases. This produces a kink at the prevailing price and a gap (discontinuity) in the MR curve, so MC can change within the gap without altering price or output - explaining sticky prices.
More Price Determination in Different Markets MCQs
- Q14A formal agreement among oligopolistic firms to fix prices or share output, in order to act like a monopoly, is called:
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