A monopolistically competitive firm chooses
A)both the quantity of output to produce and the price at which it will sell its output.
B)the price of the product it sells but market forces determine the quantity it will be able to sell.
C)the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry.
D)the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms have some control over the price they charge for their products but cannot fully dictate the market price. They can influence the quantity they sell by adjusting their price but will always face competition from other firms in the industry. Therefore, the monopolistically competitive firm chooses the price of the product it sells, but the market forces determine the quantity it will be able to sell.

A Monopolistically Competitive Firm Chooses