If a monopolistically competitive firm is producing 800 units of output and the marginal revenue from producing the 800th unit of output is $2.25 and the marginal cost is $2.25, which of the following is true?

Question

Quizplus · Accepted Answer

If the marginal revenue and marginal cost are equal at a certain level of output, the firm is maximizing profit at that level. Therefore, the firm should not increase or decrease production, and is already maximizing profit. The information given about the 1,200th unit of output is irrelevant to determining the current profit-maximizing level of production.

If a Monopolistically Competitive Firm Is Producing 800 Units of Output