Which of the following is always true regarding a profit-maximizing monopolistically competitive firm in short-run equilibrium?

Question

Quizplus · Accepted Answer

A profit-maximizing monopolistically competitive firm will produce where marginal revenue (MR) equals marginal cost (MC). This is because in the short-run, the firm has some market power to increase its price above its marginal cost, but it will only do so up to the point where MR = MC. This ensures that the firm is producing the level of output where the incremental revenue from selling one more unit of output (MR) is just equal to the incremental cost of producing that unit (MC). This rule leads to the highest possible level of profits in the short-run for the monopolistically competitive firm. Therefore, MR = MC is always true for a profit-maximizing monopolistically competitive firm in short-run equilibrium.

Which of the Following Is Always True Regarding a Profit-Maximizing