If a firm faces a downward-sloping demand curve,
A)the demand for its product must be inelastic.
B)it has no control over the price or the quantity sold.
C)it must reduce its price to sell more units.
D)it will always make a profit.

Question

Quizplus · Accepted Answer

A downward-sloping demand curve indicates that as the price of the product decreases, the quantity demanded increases. Therefore, to sell more units, the firm must reduce its price. The elasticity of demand is not specified, so we cannot conclude that it is either elastic or inelastic. The firm does have some control over the price, as it can adjust it to influence the quantity sold. Profitability will depend on the cost structure and the pricing strategy chosen by the firm.

If a Firm Faces a Downward-Sloping Demand Curve