If a firm operating in monopolistic competition is producing a quantity at which MC

Question

If a firm operating in monopolistic competition is producing a quantity at which MC < MR,then profit can be _____ by _____.
A)increased;decreasing production
B)increased;increasing production
C)increased;increasing the price
D)maximized;decreasing production

Quizplus · Accepted Answer

If a firm operating in monopolistic competition is producing a quantity at which MC < MR, it means that the marginal cost of producing an additional unit of output is less than the marginal revenue received from selling it. Therefore, the firm can increase its profits by producing more units until MC=MR. This is because each additional unit produced will generate more revenue than it costs to produce. Therefore, increasing production will increase profits in this case.

If a Firm Operating in Monopolistic Competition Is Producing a Quantity