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

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

Quizplus · Accepted Answer

In monopolistic competition, firms have some degree of market power due to product differentiation, so raising the price above P will result in losing some, but not all, customers.

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