In the model of an imperfectly competitive market:
A) the marginal revenue curve lies above the demand curve.
B) firms are price-takers who behave as if they are unable to affect the price.
C) producers supply additional output up to the point where marginal revenue equals marginal cost.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

In an imperfectly competitive market, firms have some degree of market power and can influence the price of their goods. Therefore, the marginal revenue curve lies below the demand curve. Producers supply additional output up to the point where marginal cost equals marginal revenue, which is less than price. Therefore, choice C is the best answer. Choices A and B are incorrect since they portray perfectly competitive markets, where firms are price-takers and the marginal revenue curve lies on the demand curve.

In the Model of an Imperfectly Competitive Market