Which market structure has a "kinked demand curve"?
Options
AMonopoly
BOligopoly
CPerfect Competition
DMonopolistic Competition
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Price Determination in Different MarketsPYQ - Jan 2021Question 67 of 20
All Questions Correct Answer
✅ Option b — Oligopoly
All Options:
- AMonopoly
- BOligopoly
- CPerfect Competition
- DMonopolistic Competition
Detailed Solution & Explanation
To determine which market structure has a "kinked demand curve", let's break it down:
• The kinked demand curve is a concept in microeconomics that explains how firms behave in a specific market structure.
• This curve is characterized by a sharp change in the slope of the demand curve at a certain point, resulting in a "kink".
• The kinked demand curve is typically associated with oligopoly, a market structure where a few firms compete with each other.
• In an oligopoly, firms are interdependent, meaning that the actions of one firm affect the others, leading to a kinked demand curve.
The correct answer is oligopoly because it is the market structure where firms are aware of their interdependence and the kinked demand curve arises from this awareness.
Other market structures, such as perfect competition, do not have a kinked demand curve because firms are price-takers and do not have the ability to influence prices, and monopoly does not have a kinked demand curve because there is only one firm in the market.
About This Chapter: Price Determination
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Perfect Competition, Monopoly, Monopolistic, Oligopoly
This high-weightage chapter covers all four market structures: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly. Students learn how price and output are determined under each structure, along with key concepts like Price Discrimination, Kinked Demand Curve, and the conditions of equilibrium (MR = MC).
View Official ICAI SyllabusExam Strategy Tip
This chapter carries the highest weightage (~15%). Focus on features of each market, the shape of AR and MR curves, and understand why firms in Perfect Competition are 'Price Takers' while Monopolists are 'Price Makers'.
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More Questions from Price Determination in Different Markets
Under which of the following forms of market structure does a firm have no control over the price of its product?
A firm encounters its "shutdown point" when:
Kinked demand curve hypothesis is designed to explain in context of oligopoly
Which of the following is not a characteristic of a "Price Taker"?
Price discrimination will be profitable only if the elasticity of demand in different markets is:
Which of the following is not an essential condition of pure competition?
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