Question

A monopolistically competitive firmA. faces a downward-sloping demand curve and a steeper downward -sloping marginal revenue curve.B. faces a vertical demand curve and identical marginal revenue curveC. Produces a product that is undifferentiated by style, location, or qualityD. faces an upward-sloping demand curveE. faces a downward-sloping demand and a horizontal marginal revenue curve.

Answer 1

Option A is correct.

Step-by-step explanation:

Option A is correct because a monopolistically competitive firm has a downward-sloping demand curve and the marginal revenue curve is steeper than the demand curve that lies below the demand curve. Moreover, in this market, the product sold can be differentiated on the basis of quality. Further, in this market, the marginal cost curve first decreases then start increasing and cuts the marginal revenue curve.