Question

Which of the following statements is true​?

A. Because the demand curve for a monopolistically competitive firm is downwardminussloping its marginal revenue will be negative.
B. The marginal revenue of a monopolistically competitive firm will be always be positive.
C. The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices.
D. The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.

Answer 1

The correct answer is option C.

Step-by-step explanation:

A monopolistic competitive firm has a downward sloping demand curve. Such a firm is a price maker. It decides price and output through the interaction of the marginal revenue and marginal cost.

The marginal revenue is the change in revenue because of selling an additional output. At high prices, the marginal revenue will be positive while at low prices it will be negative.