How do both monopolistically competitive firms and perfectly competitive firms maximise profit?
A)By producing where price equals average total cost.
B)By producing where marginal revenue equals average revenue.
C)By producing where marginal revenue is equal to marginal cost.
D)By producing where price equals average variable cost.

Question

Quizplus · Accepted Answer

Both monopolistically competitive firms and perfectly competitive firms maximise profit by producing where marginal revenue is equal to marginal cost. This is because at this point, the firm is producing the quantity of output where the additional revenue from producing one more unit is equal to the additional cost of producing that unit. This ensures that the firm is maximising its profits and not producing too much or too little. Options A, B, and D do not accurately represent the profit-maximising point for these types of firms.

How Do Both Monopolistically Competitive Firms and Perfectly Competitive Firms