The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-In monopolistic competition, firms may differentiate their products in many ways except on the basis of:
A)quality.
B)style.
C)price.
D)packaging.
E)guarantees.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-In monopolistic competition, firms may differentiate their products in many ways except on the basis of:
A)quality. 
B)style. 
C)price. 
D)packaging. 
E)guarantees.

Quizplus · Accepted Answer

Monopolistically competitive firms can differentiate their products in quality, style, packaging, guarantees, marketing, and other aspects, but they cannot differentiate solely on the basis of price because they face a downward-sloping demand curve and have some market power to set their own prices. If they raise their prices too much, they risk losing customers to close substitutes or to rival firms that offer similar products at lower prices. Therefore, the correct answer is C) price.

The Figure Given Below Shows the Revenue and Cost Curves