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
-Strategic behavior occurs when:
A)there are a large number of firms selling identical products.
B)there is only one firm in the market.
C)the firms have no command over the prices of the good they produce.
D)the firms can take any decision irrespective of what their rival does.
E)what is best for a firm depends on what his rival does.

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
-Strategic behavior occurs when:
A)there are a large number of firms selling identical products. 
B)there is only one firm in the market. 
C)the firms have no command over the prices of the good they produce. 
D)the firms can take any decision irrespective of what their rival does. 
E)what is best for a firm depends on what his rival does.

Quizplus · Accepted Answer

The graph shows a monopolistically competitive firm, which means there are other firms producing similar products. In such a market structure, strategic behavior becomes essential as the actions of one firm would have an impact on the other firms. Therefore, the best choice is E, which states that what is best for a firm depends on what its rival does.

The Figure Given Below Shows the Revenue and Cost Curves