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A-Level Economics · Kinked demand (oligopoly) diagram question

Which distance is the DISCONTINUITY in marginal revenue — the MR gap?

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The diagram

The answer

The distance E F. E (4,5) down to F (4,2). Two different demand slopes mean two different MR curves, so MR jumps at the kink instead of joining up. Each half of the kinked demand curve generates its own marginal revenue curve, and they do not meet. MR runs down to E, then restarts lower down at F: the vertical gap E to F. A kink in AR always produces a jump in MR — that gap is the engine of the whole model.

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This is one of 6 questions on the kinked demand (oligopoly) diagram — every corner lettered, every wrong answer diagnosed.

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