CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

In monopolistic competition, a firm will set marginal cost equal to ______
A. marginal revenue and will face a horizontal demand curve.
B. price and will face a downward-sloping demand curve.
C. marginal revenue and will face a downward-sloping demand curve.
Explanation: In monopolistic competition firms face a downward-sloping demand curve as well as a downward-sloping marginal revenue curve. A firm will set its margin cost equal to marginal revenue for profit maximization.

User Contributed Comments 2

User Comment
jpducros Is demand curve ALWAYS downward sloping ?
ChuongN No, there is the case of a veblen good.
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