Consider the demand curves facing two firms: For curve 1, a $4 decrease in price increases quantity demanded by 2 units. For curve 2, a $3 decrease in price increases quantity demanded by 1 unit. Curve _____ is steeper, so an expansion of output drives down marginal revenue more along _____.

Question

Quizplus · Accepted Answer

The steepness of a demand curve is determined by how much quantity demanded changes in response to a price change. Curve 2 is steeper because a smaller decrease in price ($3 vs. $4) leads to a smaller increase in quantity demanded (1 unit vs. 2 units) compared to curve 1. Therefore, an expansion of output would drive down marginal revenue more along curve 2 than curve 1, due to its steeper nature and less responsiveness to price changes.

Consider the Demand Curves Facing Two Firms: for Curve 1