A firm in a monopolistically competitive industry ?
Correct answer: D. must lower price to sell more output.
- A. sells a fixed amount of output regardless of price.
- B. must raise price to sell more output
- C. can sell an infinite amount of output at the market-determined price
- D. must lower price to sell more output.
Explanation
A monopolistically competitive firm faces a downward-sloping demand curve because its product is differentiated from competitors'. It must therefore lower its price to sell a larger quantity.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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