If a firm in monopolistic competition lowers its price, what will happen to the quantity of products it sells?
a. The quantity of products sold will increase and sales revenue will fall.
b. The quantity of products sold will decrease because this is not perfect competition.
c. The quantity of products sold will increase slightly—and in some cases not at all.
d. The quantity of products sold and sales revenues will increase as the firm lures customers from its competitors and attracts new customers.
Ans: d. The quantity of products sold and sales revenues will increase as the firm lures customers from its competitors and attracts new customers.
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A monopolistically competitive market could be considered inefficient because
a. marginal revenue exceeds average revenue. b. price exceeds marginal cost. c. the efficient scale of production is only achieved in the long run, not in the short run. d. markup pricing does not occur in any other market structure.
When oligopolistic firms in an industry form a cartel, then it is most likely that
A) both industry output and prices will increase. B) both industry output and prices will decrease. C) industry output will increase while prices will decrease. D) industry output will decrease while prices will increase.