For a monopolistically competitive firm, marginal revenue
A)equals the price.
B)is greater than the price.
C)is less than the price.
D)and the price are unrelated.

Question

Quizplus · Accepted Answer

In monopolistic competition, a firm faces a downward sloping demand curve since it has some market power to influence the price. This means that as the firm increases its output, it has to lower the price to sell more units. As a result, the marginal revenue (MR) curve is below the demand curve and has a steeper slope. In fact, MR is always less than the price because the last unit sold reduces the price for all units sold. Therefore, choice C is the correct answer.

For a Monopolistically Competitive Firm, Marginal Revenue