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Figure: Profit Maximization in Monopolistic Competition
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,if the firm raises its price above P,it will _____ customers.
A)lose all of its
B)still have some
C)not lose any
D)gain many new

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Use the following to answer question:
Figure: Profit Maximization in Monopolistic Competition 
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,if the firm raises its price above P,it will _____ customers.
A)lose all of its 
B)still have some 
C)not lose any 
D)gain many new

Quizplus · Accepted Answer

In a monopolistically competitive market, firms have some degree of market power due to product differentiation. Therefore, if a firm raises its price above P, it will not lose all its customers because some may remain loyal due to preferences for its unique product features. However, it is likely to lose some customers who find better prices or substitutes elsewhere, indicating it will still have some customers.

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