If the demand curve is kinked as shown to the right the marginal revenue curve will have an unusual shape.
As always the marginal revenue curve lies below the relevant demand curve and is steeper, so it makes sense that the MR curve shown here has two segments with very different slopes. What is unususal is the gap in the MR curve, shown by the dashed line. Simply put, if the firm lowers price below P* a strong reaction from competitors occurs in the form of industry wide price drops. This causes MR to drop dramatically, causing a gap in the curve.
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