The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-The objective of creating a brand name is:
A)to reduce the price of the product.
B)to ensure a steady supply of the good in the market.
C)to reduce the price elasticity of demand.
D)to reduce the cost of production of the firm.
E)to attract rival firms into the market.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-The objective of creating a brand name is:
A)to reduce the price of the product. 
B)to ensure a steady supply of the good in the market. 
C)to reduce the price elasticity of demand. 
D)to reduce the cost of production of the firm. 
E)to attract rival firms into the market.

Quizplus · Accepted Answer

The objective of creating a brand name in a monopolistically competitive market is to reduce the price elasticity of demand by making the product more differentiated in the eyes of the consumers. This allows the firm to have a degree of market power and charge a higher price than its marginal cost, which in turn leads to higher profits. Therefore, the correct answer is C. The other options are not relevant to the objective of creating a brand name in this context.

The Figure Given Below Shows the Revenue and Cost Curves