Question

According to the kinked-demand model of oligopoly, if two of three firms ignore a price decrease by the third firm ______. Multiple choice question. the third firm will lose sales because the other two firms' demand curves become more inelastic the third firm will gain sales because the other two firms' demand curves become more elastic the third firm will gain sales because the other two firms' demand curves become more inelastic, relative to the third firm's demand curve the third firm will lose sales because the other two firms' demand curves become more elastic

Answer 1

In the kinked-demand model of oligopoly, if two of three firms ignore a price decrease by the third firm, the third firm will lose sales because the other two firms' demand curves become more elastic.

Step-by-step explanation:

The correct answer is:

the third firm will lose sales because the other two firms' demand curves become more elastic

According to the kinked-demand model of oligopoly, if two of three firms ignore a price decrease by the third firm, the other two firms' demand curves become more elastic relative to the third firm's demand curve. This means that if the third firm lowers its price, the other two firms will not match the price decrease, resulting in a decrease in demand for the third firm's product and a loss in sales.