CFA Practice Question

CFA Practice Question

The men's suit business is monopolistically competitive. It follows that the marginal revenue of any quantity sold for any firm in the industry:
A. is less than the price necessary to sell that quantity.
B. is equal to the price necessary to sell that quantity.
C. is greater than the price necessary to sell that quantity.
Explanation: Monopolistically competitive firms faces a downward sloping demand curves. Since the demand curve reflects price per unit, it is the average revenue curve and since it is falling marginal revenue must lie below it. The firms will set marginal revenue equal to marginal costs and the price for that output will exceed marginal revenue.

User Contributed Comments 2

User Comment
JalaniN MR=MC but MC<P so MR<P
pstebelp Thanks JalaniN
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