The kinked-demand curve model helps to explain price rigidity because:

A) there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.
B) demand is inelastic above and elastic below the going price.
C) the model assumes firms are engaging in some form of collusion.
D) the associated marginal revenue curve is perfectly elastic at the going price.

Kinked-Demand Curve

A model in oligopoly markets where firms face a more elastic demand curve for price increases and a less elastic curve for price decreases.

Marginal Revenue Curve

A graphical representation showing the change in total revenue that results from selling one additional unit of a product or service.

Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good.