Question

A firm in a monopolistically competitive industry ______________.

• A. can sell an infinite amount of output at the market determined price
• B. must lower price to sell more output
• C. must raise to sell more output
• D. is dependent on oligopolistic firm

Answer 1

Answer: (B)

must lower price to sell more output

In a monopoly competition, there is only one seller and huge number of buyers due to which there remains no competition for the seller and no substitutes for the buyers. Therefore, a monopolist has ultimate control over the price of the commodity which is known as monopoly power of the firm. Under this market, the firm can earn super normal profits but then also the firm has to keep its price low in order to sell more quantity in the market due to which they have a downward sloping demand curve.