A residual demand curve
A) Shoes the relationship between the market price and the quantity demanded by consumers at each price
B) Shows the relationship between a firm's output and the market price given the prices charged by the firm's rivals
C) Shows the relationship between a firm's output and the market price given the outputs of the firm's rivals
D) Shows the remaining demand for a good after a firm's rivals have sold their output

Question

Quizplus · Accepted Answer

A residual demand curve shows the relationship between a firm's output and the market price given the outputs of the firm's rivals. It is the demand that remains for a good after the sales of another firm have been subtracted from the total market demand. This curve helps firms to make production and pricing decisions based on the actions of its rivals.

A Residual Demand Curve