A Firm in Monopolistic Competition with a Down-Sloping Demand Curve

question 53

Multiple Choice

A firm in monopolistic competition with a down-sloping demand curve:

• A) does not have to worry about price competition due to the nature of its demand curve.
• B) can use marginal analysis to help it maximize profits.
• C) will have to charge the "market price" which is set by the intersection of industry supply and demand.
• D) could use marginal analysis to compare alternatives-but this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability.
• E) None of these alternatives is correct.

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Definitions:

Purchase Discounts

A reduction in the price paid for goods or services if payment is made within a specified period, used as an incentive for early payment.

Cash

Money in the form of currency, including bills and coins, that can be used to pay for goods and services.

Internal Control

Methods and systems put in place by an organization to guarantee the accuracy of financial and accounting data, encourage responsibility, and deter dishonest practices.