The Model of the Kinked Demand Curve in Price Competition

Multiple Choice

The model of the kinked demand curve in price competition implies that:

A) strong brand loyalty by consumers gives firms little incentive to reduce prices.
B) free entry in the market will eventually reduce economic profits to zero.
C) a firm's competitors will match any price cuts by the firm but not price hikes.
D) firms will coordinate prices so as to maximize group profit.
E) firms in the market match the market price set by a single dominant firm.