According the kinked demand curve model:

A. a change in marginal cost causes the profit-maximizing level of output to change by the same amount but in the opposite direction

B. small changes in a firm's marginal costs can leave the equilibrium price unchanged

C. a change in marginal cost causes the profit-maximizing level of output to change by the same amount and in the same direction

D. a small change in marginal cost causes a large change in the profit-maximizing level of output.

Question

Fury

Business

2 September, 16:21

According the kinked demand curve model:

A. a change in marginal cost causes the profit-maximizing level of output to change by the same amount but in the opposite direction

B. small changes in a firm's marginal costs can leave the equilibrium price unchanged

C. a change in marginal cost causes the profit-maximizing level of output to change by the same amount and in the same direction

D. a small change in marginal cost causes a large change in the profit-maximizing level of output.

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Answers (1)

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Ruth Pittman · Answer 1

C. a change in marginal cost causes the profit-maximizing level of output to change by the same amount and in the same direction

Explanation:

Kinked demand curve consider that the business may face a double demand curve based on the likely response of other firms to change in the price of product.

it assumes that the change in variable cost may not cause to rise or fall in the profit maximising price in the market.

Due to change in cost the equilibrium price and output of product remains constant