When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?
A)the output effect
B)the income effect
C)the substitution effect
D)the price effect

Question

Quizplus · Accepted Answer

The "one bad thing" that happens to a monopolistically competitive firm when it lowers its price is the price effect. This refers to the fact that by lowering the price, the firm is also lowering its per-unit revenue, which can lead to a decrease in profits.

When a Monopolistically Competitive Firm Lowers It Price One Bad