If the marginal revenue curve lies above the demand curve for a firm,then
A) this is not a firm that exists in any traditional industries.
B) both curves are upward-sloping.
C) both curves are parallel.
D) this must be a monopolistically competitive firm.
E) both curves are downward-sloping.

Question

Quizplus · Accepted Answer

The marginal revenue curve cannot lie above the demand curve in traditional market structures. In standard economic models, for monopolies and monopolistically competitive firms, the marginal revenue curve lies below the demand curve due to the downward-sloping nature of the demand curve and the need to lower prices to sell additional units.

If the Marginal Revenue Curve Lies Above the Demand Curve