Question

Question 7

An oligopolist operating with a kinked demand curve would expect rivals to match its price:

1. increases.
2. decreases.
3. both a and b.
4. neither a nor b.

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Question 10

Which of the following is true about advertising by a firm?

1. It is not always successful in increasing demand for a firm's product.
2. It attempts to increase demand and to make demand more inelastic.
3. It may reduce per unit costs of production when economies of scale are experienced.
4. All of these.

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Answer 1

Q7

Answer

Option B

decrease

A rival firm follows the price cut of the firm because the price cut may decrease the share of other competitors in the market, so other firms also decrease the prices.

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Q8

Answer

Option B

It attempts to increase demand and to make demand more inelastic

Advertising increases the demand because it spread the different qualities and discount about the product and it increases popularity, so the demand becomes inelastic.