With respect to the kinked demand curve, price is greater than marginal costs

Marketing Jan 12, 2021

With respect to the kinked demand curve, price is greater than marginal costs.

True

False

Expert Solution

With respect to the kinked demand curve, price is greater than marginal costs. True. With a kinked demand curve, just as with any market with a price setter, firms will determine the price at the output level where the marginal cost and marginal revenue are equal to each other. Because the marginal revenue is less than demand (which determines price), the point where marginal cost and marginal revenue are equal to each other will always be below the price.

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