A firm faces a kinked demand curve which is relatively flat above Po and relatively steep below Po.
a. Describe the pricing behavior of the firm's rivals. In particular, how do they react to changes in price?
b. Assuming the segments of the demand curve are linear, draw and describe the Marginal Revenue Curve.
c. Why is the price likely to remain at Po?
Ideas are given to draw and describe the Marginal Revenue Curve.