Due to an Increase in the Price of a Competitor's

question 4

Multiple Choice

Due to an increase in the price of a competitor's product, the demand for a firm's product increases sharply. How is this most likely to affect the firm's marginal revenue and marginal cost?

• A) Marginal revenue will increase but marginal cost will decrease.
• B) Both marginal revenue and marginal cost will not be affected.
• C) Both marginal revenue and marginal cost will increase.
• D) Marginal revenue will not change but marginal cost will increase.
• E) Marginal revenue will increase but marginal cost will not change.

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