Exhibit 10-18
-In Exhibit 10-18, the monopolistic competitor's profit-maximizing level of output is

Question

Exhibit 10-18 
-In Exhibit 10-18, the monopolistic competitor's profit-maximizing level of output is

Quizplus · Accepted Answer

The monopolistic competitor's profit-maximizing level of output is where marginal cost (MC) equals marginal revenue (MR), which is at 3 units in the graph. At this level of output, the firm charges a price equal to the average total cost (ATC), which is $8 in the graph. Therefore, the firm earns positive economic profits. At any other level of output, either MR is less than MC (if producing more than 3 units) or ATC is greater than price (if producing less than 3 units), and the firm would not be maximizing profit.

Exhibit 10-18 -In Exhibit 10-18, the Monopolistic Competitor's Profit-Maximizing Level of Output