Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. in this case, the firm perceives its demand curve to be:

a. kinked, being steeper above the going price than below.

b. kinked, being steeper below the going price than above.

c. linear, being less elastic at lower prices.

d. linear, being more elastic at higher prices.

Question

Leo Estes

Business

9 September, 09:27

Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. in this case, the firm perceives its demand curve to be:

a. kinked, being steeper above the going price than below.

b. kinked, being steeper below the going price than above.

c. linear, being less elastic at lower prices.

d. linear, being more elastic at higher prices.

+2

Answers (1)

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Kallie Key · Answer 1

Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. In this case, the firm perceives its demand curve to be kinked, being steeper below the going price than above. In an oligopolist market, there are only a few firm that dominate the market. The market is highly concentrated therefor they tend to match price cuts to keep in line with one another so they can all survive to operate within the demanding markets.