The Marginal Revenue Curve Lies Below the Demand Curve for a Competitive

question 131

Multiple Choice

The marginal revenue curve lies below the demand curve for a competitive price searcher because

• A) in order for a competitive price searcher to sell an extra unit, it must cut the price on all units. The lowered price offsets the additional revenue from the extra unit sold, so the marginal revenue is lower than the price.
• B) in order for a competitive price searcher to sell an extra unit, it must increase its advertising. The cost of advertising offsets the extra revenue generated by the extra sales, so the marginal revenue is lower than the price.
• C) whenever a competitive price searcher discovers a profit-maximizing pricing policy, the economic profit it generates attracts new competitors into the industry, driving marginal revenue below the price.
• D) none of the above apply. The marginal revenue curve is the demand curve for a competitive price searcher.

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Definitions:

Ethnocentrism

The tendency to view one’s own culture as superior to all others.

Cultural Relativism

The principle that an individual's beliefs and activities should be understood in terms of their own culture, rather than judged against the criteria of another.

Sociological Imagination

C. W. Mills’s term for the ability to perceive how dynamic social forces influence individual lives.

Language

A shared symbol system of rules and meanings that governs the production and interpretation of speech.