Bonus Packs Are Intended to Encourage Trial from Consumers.
Which of the following statements is true?
A) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices.
B) Because the demand curve for a monopolistically competitive firm is downward sloping, its marginal revenue will be negative.
C) The marginal revenue of a monopolistically competitive firm will be always be positive.
D) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.
In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.
When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.
If marginal revenue is negative,then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling 1 more unit of the good.