Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition

-(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (a), if the firm raises its price above P, it will:
A) lose all its customers.
B) still have some customers.
C) not lose any customers.
D) have none of the above occur.

Question

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
 
-(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (a), if the firm raises its price above P, it will:
A) lose all its customers. 
B) still have some customers. 
C) not lose any customers. 
D) have none of the above occur.

Quizplus · Accepted Answer

In Panel (a), if the firm raises its price above P, it will still have some customers because the demand curve is downward sloping, meaning that some customers are still willing to buy the product at a higher price. However, the higher price may attract fewer customers and result in lower profits for the firm.

Use the Following for Questions 22-31