If a firm faces a downward-sloping demand curve, then:
A)the firm could be either a perfectly competitive firm or an imperfectly firm.
B)the firm's marginal revenue from selling an additional unit of output is less than price.
C)it is a perfectly competitive firm.
D)the firm's production process exhibits economies of scale.

Question

Quizplus · Accepted Answer

If a firm faces a downward-sloping demand curve, then in order to sell an additional unit of output, it must lower its price-and not just for the additional unit but for all of the units it could have sold at the original (higher)price. As a result, the marginal revenue from selling an additional unit of output is less than the price of that unit.

If a Firm Faces a Downward-Sloping Demand Curve, Then