Questions: The demand curve will be kinked if rival oligopolists Multiple Choice match price increases but not price reductions. match price reductions but not price increases. match both price increase and price reductions. do not match price changes at all.

The answer is the second one: match price reductions but not price increases.

Explanation for each option:

1. Match price increases but not price reductions: This would not lead to a kinked demand curve. If rivals match price increases, the firm would not have an incentive to increase prices, as it would not gain market share, and the demand curve would not have a kink.

2. Match price reductions but not price increases: This is the correct answer. In a kinked demand curve model, if a firm reduces its price, rivals will match the price cut to maintain their market share, leading to a relatively inelastic demand below the current price. However, if the firm raises its price, rivals do not follow, and the firm loses market share, leading to a more elastic demand above the current price. This behavior creates a kink in the demand curve at the current price level.

3. Match both price increase and price reductions: If rivals match both price increases and reductions, the demand curve would be relatively smooth and not kinked, as the firm would not experience significant changes in market share with price changes.

4. Do not match price changes at all: If rivals do not match price changes, the firm would face a standard demand curve without a kink, as it would gain or lose market share based on its own price changes without any competitive response.

In summary, the kinked demand curve arises when rival oligopolists match price reductions but not price increases.