Both monopolistically competitive firms and perfectly competitive firms maximize profits
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 aim to maximize profits by producing at the point where marginal revenue equals marginal cost. This is because marginal revenue represents the additional revenue generated by producing one extra unit, while marginal cost represents the additional cost incurred by producing one extra unit. By producing where these two are equal, the firm can maximize its profits.

Both Monopolistically Competitive Firms and Perfectly Competitive Firms Maximize Profits