Question

an oligopolist faces a demand curve that is steeper at higher prices than at lower prices. which of the following is most likely? group of answer choices the firm competes with others in the cournot fashion. other firms match price increases but do not match price reductions. the firm competes with others in the bertrand fashion. other firms match price reductions but do not match price changes.

Answer 1

A kinked demand curve implies that competing oligopoly firms match price cuts but not price increases, resulting in a demand curve that is steeper at higher prices when compared to lower prices.

Step-by-step explanation:

An oligopolist facing a demand curve that is steeper at higher prices than at lower prices suggests that if the firm lowers its price, other firms in the industry will follow, but if the firm raises its price, other firms do not match the price increase. This is indicative of a kinked demand curve, which occurs when oligopoly firms commit to match price cuts but not price increases. The presence of the kink in the demand curve means that a firm will see very little increase in quantity sold from a price cut due to the other firms' reactions, which match the price reductions but don't match price increases.