Economics (AS & A Level) · May / June 2021 · Paper 31 · Question 6

A kinked demand curve is often used when economists attempt to analyse the way in which oligopolists operate. What does the kinked demand curve indicate?

1. AOligopolists are unable to achieve profit maximisation.
2. BSatisficing is the best objective for firms that operate under conditions of oligopoly.
3. CThere are always benefits available for oligopolists if they reduce price, but not if they increase it.
4. DThere is a tendency towards price stability when firms operate under conditions of oligopoly.

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