-In the above figure, if the firm is in monopolistic competition, its price will be

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some degree of market power. Unlike perfect competition, where firms are price takers, firms in monopolistic competition set their prices above marginal costs. The correct price, in this case, is $3, as it is typically associated with the point where the firm's demand curve (which reflects its perceived market power and ability to set prices) intersects the marginal cost curve, indicating the profit-maximizing price given the downward-sloping demand curve characteristic of monopolistic competition.

-In the Above Figure, If the Firm Is in Monopolistic