For the monopolistically competitive firm,
A)Price (P)= Marginal Revenue (MR)= Average Revenue (AR).
B)P = MR AR.
C)P = AR MR.
D)P MR = AR.

Question

For the monopolistically competitive firm,
A)Price (P)= Marginal Revenue (MR)= Average Revenue (AR).
B)P = MR > AR.
C)P = AR > MR.
D)P > MR = AR.

Quizplus · Accepted Answer

In monopolistic competition, the firm faces a downward-sloping demand curve, which means that the price charged is higher than the marginal revenue earned due to the need to lower the price to increase sales. However, the price is still equal to or greater than average revenue since the firm has some degree of market power to influence the price. Therefore, option C correctly describes the relationship between price, marginal revenue, and average revenue for a monopolistically competitive firm.

For the Monopolistically Competitive Firm