1. Under a price-leadership model, a sudden drop in price by the leader is unlikely to trigger a price war if other firms believe that the price cut was caused by higher ________.
2. Arrows up, down, or horizontal: Under the kinked demand curve model, a firm that cuts its price expects its competitor to_______ its price, while a firm that raises its price expects its competitor to_______ its price.
3. An entrepreneur who acts in a manner consistent with the kinked demand curve model is a(n) _______ (optimist/pessimist).
4. Arrows up or down: In the kinked demand curve model, the demand for a firms product is relatively elastic when the price _______, and relatively inelastic when the price _______.