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Oligopoly: The Kinked Demand
Model
What are the assumptions
behind the model?
Why is the demand kinked (bent)?
Use the graph above to find:
- the profit
maximizing price and quantity
- the long run profits
- the allocatively efficient Q
- the productively efficient Q
How does the model show price
inflexibility?
What are the criticisms of the model?
Oligopoly - Long Run
Equilibrium and Efficiency
Explain why Oligopolies
earn economic profits in the long run
Draw the long run equilibrium
graph for a Kinked Demand Oligopoly
Discuss the efficiency of
Oligopolies in the long run and show the following on the
kinked demand graph:
- the profit
maximizing quantity
- the allocatively efficient quantity
- the productively efficient quantity
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