When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the
A)substitution effect.
B)income effect.
C)price effect.
D)output effect.

Question

Quizplus · Accepted Answer

When a monopolistically competitive firm cuts its price, the price effect refers to the loss in revenue per unit sold due to the lower price, even though more units may be sold.

When a Monopolistically Competitive Firm Cuts Its Price to Increase