The demand and marginal revenue curves of a monopolistic competitor are:
A)equal at all levels of output
B)equal only at their initial points
C)both equal to the average revenue curve
D)identical except at their initial points
E)never equal

Question

Quizplus · Accepted Answer

The demand and marginal revenue curves of a monopolistic competitor are equal only at their initial points, where the first unit of output is sold. Beyond this point, the marginal revenue curve lies below the demand curve due to the downward sloping demand curve, which reflects the price reduction needed to sell additional units.

The Demand and Marginal Revenue Curves of a Monopolistic Competitor