Consider the following statements: Statement 1: "The kinked demand curve model of oligopoly assumes that a decrease in price will not be followed by other firms in the industry, but a price increase will. " Statement 2: "Finns in monopolistic competition have high advertising expenses because they want to create the perception that their product is different from their competitors’ products when the competing products are actually quite similar. " Which of the following best describes the accuracy of these statementsStatement 1Statement 2 （）①A. Correct Incorrect ②B. Incorrect Correct ③C. Correct Correct
A. ①
B. ②
C. ③
参考答案：B
解析：
Statement 1 is incorrect because the kinked demand curve model contends that each firm in oligopoly competition believes that an increase (not decrease) in its price will not he followed by the competition, but a decrease (not increase) in price will. Each firm believes that it faces a demand curve that is more elastic (flatter) above a given price, i. e. the kink, than it is below the given price.