The monopolistically competitive firm in short-run equilibrium
A)faces a downward-sloping demand curve.
B)has a marginal revenue curve which lies below its demand curve.
C)maximizes profit where MR = MC.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A) A monopolistically competitive firm faces a downward-sloping demand curve since it can differentiate its product from competitors.
B) The firm's marginal revenue curve lies below its demand curve because to sell more output, it has to lower its price and therefore earns less revenue per additional unit sold.
C) The firm maximizes profit where MR = MC, which is the standard profit-maximizing rule for all firms.

The Monopolistically Competitive Firm in Short-Run Equilibrium