When a Monopolistically Competitive Firm's Demand Curve Shifts Leftward,what Happens

question 132

Multiple Choice

When a monopolistically competitive firm's demand curve shifts leftward,what happens to its marginal revenue curve?

• A) Nothing, the marginal revenue curve is unchanged.
• B) It disappears.
• C) It shifts rightward.
• D) It shifts leftward.
• E) None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic.

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Definitions:

Discount Rate

The discount rate applied in the calculation to ascertain the current value of forthcoming cash flows through discounted cash flow analysis.

Cash Inflows

The money received by a business from its various activities, such as sales, investments, financing, etc.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in a linear fashion.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.