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Answer to Question #52965 in Microeconomics for Yana

Question #52965
MULTIPLE CHOICE
1. Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:
a. fewness of firms.
b. brand loyalty of consumers.
c. powerful effect of advertising.
d. variability of concentration ratios.
e. mutual interdependence of firms.
2. A "kinked" demand curve reflects a tendency on the part of an oligopolist to:
a. follow price increases but not price reductions.
b. following price reductions but not price increases.
c. be unconcerned with rivals' behavior.
d. None of these.
3. The kinked demand theory attempts to explain why an oligopolistic firm:
a. has relatively large advertising expenditures.
b. fails to invest in research and development.
c. infrequently changes its price.
d. engages in excessive brand proliferation.
Expert's answer
1. e. mutual interdependence of firms.
2. b. following price reductions but not price increases.
3. c. infrequently changes its price.

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