Question

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:
A) demand curve as being of unit elasticity throughout.
B) supply curve as kinked, being steeper below the going price than above.
C) demand curve as kinked, being steeper below the going price than above.
D) demand curve as kinked, being steeper above the going price than below

Answer 1

Answer: C) demand curve as kinked, being steeper below the going price than above.

Explanation:

For an oligopolistic producer, who assumes that its rival would ignore a price increase but match a price cut, the perception of the firm about it demand curve is that it would be kinked, being steeper below the going price than above.