Question

If a firm lowers its price from the point where MR = MC in perfect competition, it will experience ______; in imperfect competition, it will experience _______.

a) Less profit; the quantity demanded increasing
b) The revenue disappearing; the quantity demanded decreasing
c) Increasing revenue; decreasing revenue
d) Less profit; increasing demand
e) Decreasing quantity demanded; increasing quantity demanded

Answer 1

In perfect competition, lowering the price from where MR=MC results in less profit, while in imperfect competition.

Step-by-step explanation:

In the context of different market structures, the effect of changing the price below the point where MR (Marginal Revenue) equals MC (Marginal Cost) varies. In perfect competition, if a firm lowers its price from the point where MR equals MC, it will experience less profit because the price is equal to marginal revenue in this market structure.

Reducing the price below this level would mean that marginal revenue falls below marginal cost, which reduces profit per unit sold. Whereas, in imperfect competition such as monopolistic competition, oligopoly, or monopoly, lowering the price from the MR=MC.

Point may lead to an increase in the quantity demanded since these firms have some control over their prices, and the MR does not necessarily equal the price.