If a Monopolistically Competitive Firm Raises Its Price, It

question 210

Multiple Choice

If a monopolistically competitive firm raises its price, it

• A)loses all of its customers (sales drop to zero)
• B)loses some, but not all, of its customers
• C)loses very few customers
• D)loses no customers at all
• E)gains customers (sales increase)

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Definitions:

Advertising

The activity or profession of promoting products, services, or ideas through various forms of media.

Product Quality

A measure of the perceived value, reliability, and performance of goods or services as judged by consumers.

Expensive Advertisement

High-cost marketing activities aimed at promoting products, services, or brands to a wide audience.

Product-variety Externality

An economic condition where the diversity of products benefits consumers more than what is accounted for by the producers, leading to positive external effects in a market.