The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-Under imperfect competition, a firm's:
A)demand curve lies below its marginal revenue curve.
B)demand curve lies above its marginal revenue curve.
C)demand curve coincides with its marginal revenue curve.
D)demand curve coincides with its marginal cost curve.
E)demand curve coincides with its average cost curve.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-Under imperfect competition, a firm's:
A)demand curve lies below its marginal revenue curve. 
B)demand curve lies above its marginal revenue curve. 
C)demand curve coincides with its marginal revenue curve. 
D)demand curve coincides with its marginal cost curve. 
E)demand curve coincides with its average cost curve.

Quizplus · Accepted Answer

Under imperfect competition, a firm faces a downward-sloping demand curve. To sell additional units, the firm must lower its price, which applies to all units sold. This causes the marginal revenue (the revenue from selling one more unit) to be lower than the price of that unit, meaning the marginal revenue curve lies below the demand curve.

The Figure Given Below Shows the Revenue and Cost Curves