Question

Which of the following is true for a firm with a downwardminussloping demand curve for its​ product?

A. ​Price, average​ revenue, and marginal revenue are all equal.
B. ​Price, average​ revenue, and marginal revenue are all different.
C. Price equals average revenue but is greater than marginal revenue.
D. Price equals average revenue but is less than marginal revenue.

Answer 1

The correct answer is option C.

Step-by-step explanation:

If a firm is facing a downward sloping demand curve, it means that the firm is a price maker. Such a firm will determine its price and output by the intersection of the marginal revenue curve and marginal cost curve.

The equilibrium output will be at the point where marginal cost is equal to the marginal revenue. The price will be equal to the average revenue at the point of intersection of marginal cost and marginal revenue but higher than marginal cost and marginal revenue.