Firms in a monopolistically competitive market will

Question

Quizplus · Accepted Answer

Firms in a monopolistically competitive market will use the profit-maximizing rule MC = MR to determine their output level. This is because they have some market power, but still face competition from other firms, so they must balance the price they charge with the quantity they produce in order to maximize their profits. However, they may not produce efficiently or make economic profits in the long run due to the excess capacity and competition in the market.

Firms in a Monopolistically Competitive Market Will