For the monopolistically competitive firm, the steepness of the demand curve depends on:
A. the number of consumers in the market.
B. the steepness of the MC curve.
C. the availability of close substitutes.
D. None of these statements is correct.
Answer: C
You might also like to view...
An example of a firm in monopolistic competition is
A) your local water company. B) the sole cable television company. C) the many Chinese restaurants in San Francisco. D) Kansas Power and Light, the sole provider of electricity in Kansas City. E) Shaniq, a wheat farmer.
Which of the following offers the fullest explanation of why "price equals marginal cost" is the rule from marginal analysis that indicates the profit-maximizing output level?
a. If output were reduced from the profit-maximizing level, then the firm would be giving up marginal revenue that exceeds marginal cost, and thus reducing the level of profit. b. If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit. c. Because the firm colludes with other similar firms to set price equal to marginal cost. d. Both a. and b. above are correct.