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Question
Which of the following best describes the relationship between price and marginal revenue for monopolistic competitors?
a. They are always equal.
b. They are equal only when there are relatively few firms in the industry.
c. Price is below marginal revenue, as a general rule, regardless of the number of firms in the monopolistically competitive industry.
d. Price is above marginal revenue, as a general rule, regardless of the number of firms in the monopolistically competitive industry.
e. At low levels of output, price is above marginal revenue. At high levels of output, price is below marginal revenue as long as the number of firms is not too many because, if it is too large, the monopolistically competitive industry will become perfectly competitive.
Answer
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