For a monopolistically competitive firm, marginal revenue
A)equals the price.
B)is greater than the price.
C)is less than the price.
D)and price are unrelated.

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms have some control over the price of their product due to product differentiation, but still face competition from other firms producing similar products. As a result, the demand curve for each firm's product is downward sloping but relatively elastic. This means that when a monopolistically competitive firm increases its output, it will have to lower its price in order to sell the additional units, resulting in a marginal revenue that is less than the price. Therefore, the correct answer is C.

For a Monopolistically Competitive Firm, Marginal Revenue