In monopolistic competition:

Question

Quizplus · Accepted Answer

In monopolistic competition, firms are price setters, meaning they have some market power to set prices above marginal cost (MC). However, to maximize profits, firms still produce where marginal revenue (MR) equals MC. Therefore, choice A is true. Choice B is not true because monopolistically competitive firms produce at a point where price (P) is greater than marginal cost (MC), meaning that reducing output would not necessarily make consumers better off. Choice C is not necessarily true, as increasing output would require the firm to incur additional costs, particularly if they are operating at capacity.

In Monopolistic Competition