Which oligopoly model leads to price rigidity? Graphically show why.
What will be an ideal response?
The kinked demand curve model leads to price rigidity. The graph shows the vertical segment on MR corresponding to the kink in demand. If MC passes through the vertical segment on MR, the firm will not change its price. As shown in Figure 13-5, MC drops, but the profit-maximizing price remains at P*.
Figure 13-5
Figure 13-5
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Economics
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Which of the following is an example of the Fed making monetary policy?
A) Increasing government spending by $30 million B) Decreasing the tax rate on interest rate earnings C) Decreasing the discount rate to 2% D) Increasing subsidies to solar energy producers
Economics
According to the law of demand, if:
a. product price increases, quantity demanded will decrease. b. consumer income increases, quantity demanded will increase. c. product price increases, quantity demanded will increase. d. consumer income increases, quantity demanded will decrease. e. supply increases, demand will increase.
Economics