Billy is running a fast-food burger stand in his small community.If he is like other monopolistic competitors in short-run equilibrium which of the following would be true?
A) His demand curve would be downward sloping.
B) His marginal revenue curve would lie below his demand curve.
C) He would be maximizing profits where his MC = MR.
D) All of the above would be characteristics of Billy's burger stand.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by downward sloping demand curve, with marginal revenue lying below it. Moreover, firms in monopolistic competition maximize profits where their marginal cost equals to marginal revenue. Therefore, all the given options (A, B, C) are true for a firm in short-run equilibrium under monopolistic competition.

Billy Is Running a Fast-Food Burger Stand in His Small