Question

If price makers raise their prices, they will lose _______. Therefore, they face both a downward sloping demand curve and a downward sloping marginal revenue curve?

1) market share
2) customers
3) revenue
4) profit

Answer 1

A monopolistic competitor faces a downward-sloping demand curve and a downward-sloping marginal revenue curve. If price makers raise their prices, they will lose profit.

Step-by-step explanation:

A monopolistic competitor faces a downward-sloping demand curve and a downward-sloping marginal revenue curve because of the presence of substitutes. Unlike a monopoly, a monopolistic competitor can raise its prices without losing all of its customers, but it will lose more customers than a perfectly competitive firm. Therefore, if price makers raise their prices, they will lose profit.