If the demand curve faced by a firm is downward sloping,we can reasonably believe that the
A)firm can influence the price of the product it sells.
B)firm will have no effect on the price of the product it sells.
C)firm must lower prices if it hopes to increase its profits.
D)firm's contributions to total output of the product is insignificant.
E)firm has no control over the price of the product it sells but can vary the output.

Question

Quizplus · Accepted Answer

If a firm faces a downward sloping demand curve, it means that the quantity demanded decreases as price increases. Thus, the firm can influence the price of the product it sells by adjusting its output. If it wants to sell more, it may have to lower the price. This is because as it increases its output, it reaches a point where the marginal cost of producing one more unit exceeds the price it can charge for that unit. Therefore, the firm cannot keep increasing the price to increase revenue.

If the Demand Curve Faced by a Firm Is Downward