The Kinked Demand curve theory assumes ?
Correct answer: C. Firms are competitive
- A. Firms cooperate
- B. Firms act as part of cartel
- C. Firms are competitive
- D. Firms are not profit maximisers
Explanation
The kinked-demand model assumes rival firms will match a price decrease but not a price increase, creating a kink and price rigidity in an oligopoly. It does not assume cooperation or cartel membership.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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