Question
In the Sweezy Model of Oligopoly, the Kinked Demand
Curve is used to explain why prices in oligopolistic markets remain relatively stable (Price Rigidity). What is the conceptual reason for the kink in the firm's demand curve?Solution
If a firm raises its price, competitors will not follow (to gain market share), making the firm's demand highly elastic (it loses many customers). If the firm lowers its price, competitors will follow (to prevent losing customers), making the demand inelastic (it gains very few new customers). This shift in elasticity at the current price level creates a "kink." Because of this kink, the Marginal Revenue (MR) curve has a vertical gap (discontinuity). As long as the Marginal Cost (MC) stays within this gap, the firm will not change its price, leading to price rigidity.
A tank has three pipes, X, Y, and Z. X can fill the tank in 8 hours, Y can fill it in 12 hours, and Z can empty it in 6 hours. If X, Y, and Z are opened...
Pipe A and B can fill the pool in 36 minutes and 48 minutes, respectively. Pipe C can empty half filled pool in 36 minutes. If all the pipes are opened ...
Pipe A can fill a tank in 45 minutes while pipe B can fill it in ____ minutes. There’s a leak in the tank which can empty it in _____minutes. When bot...
There was the leakage in the Oil tanker. If 20 litre of oil is leaked out per day then it would have lasted for 50 days and if the leakage was 32 litre ...
A pump can fill a tank with water in 2 hours. Because of a leak in the tank it was taking 7/3 hours to fill the tank. The leak can drain all the water o...
A tank can be filled by pipe A in 6 hours and by pipe B in 8 hours. A third pipe C can empty the tank in 12 hours. If all three pipes are opened togethe...
‘X’ and ‘Y’ can do a piece of work in 10 days and 25 days, respectively. ‘X’ started working alone and was replaced by ‘Y’ after 5 days...
Two pipes A and B can fill a tank in 4 hours and 7 hours respectively & a waste pipe C can empty in 8 hours. If pipes A , B & C are opened at 7a...
Two pipes, A and B, can fill a tank in 12 hours and 15 hours, respectively. Pipe A is open for 6 hours and then pipe B is also opened. After how much ti...
Pipes P and Q can fill a tank in 90 minutes and 60 minutes respectively. Another pipe R can drain the tank in 2 hours 30 minutes. Q and R are opened tog...
