Question

Under perfect competition, the marginal revenue is ____________________ while under

monopolistic competition it is _____________________.

a)downward sloping, also downward sloping.

b)horizontal, also horizontal

c)downward sloping, horizontal

d)horizontal, downward sloping

Answer 1

Answer) In perfectly competition, firm is a price taker and faces a horizontal demand curve, its marginal revenue curve is also horizontal and coincides with its average revenue.

In monopolistic competition, the marginal revenue curve is always below the demand curve when the demand curve is downward sloping because, when a producer has to lower his price to sell more of an item, marginal revenue is less than price. So, marginal revenue curve is downward sloping.

So, option d) is correct.

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