In the short run, in equilibrium, firms that operate in a
Monopolistically competitive market face a down sloping demand
Curve and will charge a price where _____ and ______.
A)quantity produced is maximized; costs are minimized
B)sales revenue is maximized; costs are falling
C)MR = MC; P average cost
D)average costs are rising; sales are rising

Question

In the short run, in equilibrium, firms that operate in a
Monopolistically competitive market face a down sloping demand
Curve and will charge a price where _____ and ______.
A)quantity produced is maximized; costs are minimized
B)sales revenue is maximized; costs are falling
C)MR = MC; P > average cost
D)average costs are rising; sales are rising

Quizplus · Accepted Answer

In the short run, firms in a monopolistically competitive market face a downward sloping demand curve which means that as they decrease the price, the quantity demanded will increase. In order to maximize profit or minimize losses they will produce where MR=MC. However, they will charge a price higher than the average cost to make a profit, but lower than the perfect competitive market to maintain their market share. Therefore, the correct choice is C - MR = MC; P > average cost.

In the Short Run, in Equilibrium, Firms That Operate in a