If marginal revenue is less than price for a firm, it must be true that the firm
A)is a monopoly
B)is in perfect competition
C)is in monopolistic competition
D)faces a perfectly elastic demand curve
E)faces a downward-sloping demand curve

Question

Quizplus · Accepted Answer

If a firm's marginal revenue is less than price, it indicates that the firm faces a downward-sloping demand curve. This is because when a firm decreases the price to sell one additional unit, it not only earns revenue from that additional unit but also experiences a decrease in revenue from the previously sold units due to the lower price. This results in a marginal revenue less than the price of the product.

If Marginal Revenue Is Less Than Price for a Firm