The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-Successful product differentiation by a monopolistically competitive firm makes the demand curve, faced by the firm, steeper.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-Successful product differentiation by a monopolistically competitive firm makes the demand curve, faced by the firm, steeper.

Quizplus · Accepted Answer

Successful product differentiation allows a firm to have some degree of market power, which allows them to charge a higher price for their product. This leads to a steeper demand curve as the quantity demanded decreases at a quicker rate in response to price increases.

The Table Below Shows the Payoff (Profit) Matrix of Firm