- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 7. Monopolistic Competition
CFA Practice Question
The output decisions of a monopolistic competitor are based on the following principle:
A. The marginal principle
B. The principle of diminishing returns
C. The principle of opportunity cost
User Contributed Comments 3
| User | Comment |
|---|---|
| Pooh | For price searcher, in order to increase output, it must set a lower price, which leads to decreasing marginal revenue - the change in total revenue that results from one additional output is smaller due to lowered price. |
| eddeb | Increase output as long as Marginal revenue exeeds Marginal cost (per unit) |
| MarcCFA | I'd call it the marginal benefit principle, why not abbreviate it to margin principle, or even just M? |