Figure 8.3
-Figure 8.3 shows demands and costs for a monopolistically competitive firm. When the firm's demand curve shifts from D₁ to D₂ and to D₃

Question

Quizplus · Accepted Answer

When the demand curve shifts from D₁ to D₂ and to D₃, it indicates a decrease in demand for the firm's product. As demand decreases, the firm may experience a higher average cost of production due to lower economies of scale, causing its cost curve to shift upward. This, in turn, could lead to a decrease in marginal revenue as the firm has to lower its prices to maintain sales volume. Therefore, all the given options are correct.

Figure 8.3 -Figure 8.3 Shows Demands and Costs for a Monopolistically Competitive