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
-Compared with generic products, a brand name:
A)reduces the price elasticity of demand and gives a firm more market power.
B)increases the price elasticity of demand and gives a firm more market power.
C)increases the price elasticity of demand and gives a firm less market power.
D)reduces the price elasticity of demand and gives a firm less market power.
E)has no effect on price elasticity of demand or market power.

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
-Compared with generic products, a brand name:
A)reduces the price elasticity of demand and gives a firm more market power. 
B)increases the price elasticity of demand and gives a firm more market power. 
C)increases the price elasticity of demand and gives a firm less market power. 
D)reduces the price elasticity of demand and gives a firm less market power. 
E)has no effect on price elasticity of demand or market power.

Quizplus · Accepted Answer

Brand names often create customer loyalty and a perception of quality, which can reduce the price elasticity of demand (consumers are less sensitive to price changes) and give the firm more market power by differentiating its products from those of competitors.

The Figure Given Below Shows the Revenue and Cost Curves