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Figure: Profit Maximization in Monopolistic Competition
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.A firm in monopolistic competition will maximize profits by producing so that:
A)P = MC.
B)MR = MC.
C)P = MR.
D)P - ATC (i.e. ,economic profit per unit)is maximized.

Question

Use the following to answer question:
Figure: Profit Maximization in Monopolistic Competition 
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.A firm in monopolistic competition will maximize profits by producing so that:
A)P = MC. 
B)MR = MC. 
C)P = MR. 
D)P - ATC (i.e. ,economic profit per unit)is maximized.

Quizplus · Accepted Answer

In monopolistic competition, the firm maximizes profit by producing where marginal revenue (MR) equals marginal cost (MC). This is because MR represents the change in revenue from selling one more unit, while MC represents the change in cost from producing one more unit. When MR > MC, the firm can increase profits by producing more, and when MR < MC, the firm can increase profits by producing less. Therefore, the profit-maximizing level of output is where MR = MC.

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