In monopolistic competition,each firm:
A)is a price taker.
B)has some ability to set the price of its differentiated good.
C)will set price equal to marginal cost.
D)has marginal revenue that is greater than price.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some ability to set the price of their differentiated goods because they face a downward-sloping demand curve. However, they cannot set a price too high because there are close substitutes available in the market. Therefore, they have to find a balance between charging a higher price for their unique product and facing competition from similar products.

In Monopolistic Competition,each Firm