Exhibit 10-3 A monopolistic competitive firm in the long run
-As presented in Exhibit 10-3, the long-run profit-maximizing output for the monopolistic competitive firm is:
A) zero units per week.
B) 200 units per week.
C) 400 units per week.
D) 600 units per week.
E) 800 units per week.

Question

Exhibit 10-3 A monopolistic competitive firm in the long run 
-As presented in Exhibit 10-3, the long-run profit-maximizing output for the monopolistic competitive firm is:
A) zero units per week. 
B) 200 units per week. 
C) 400 units per week. 
D) 600 units per week. 
E) 800 units per week.

Quizplus · Accepted Answer

In the long run, a monopolistic competitive firm produces where marginal revenue (MR) equals marginal cost (MC) and charges a price higher than the marginal cost. In Exhibit 10-3, the firm's marginal cost curve intersects the demand curve at point E, where the quantity demanded is 400 units per week. At this output level, the firm charges a price of $16, which is higher than its marginal cost of $12. This allows the firm to earn a positive economic profit. Producing either more or less than 400 units per week would result in lower profits for the firm.

Exhibit 10-3 a Monopolistic Competitive Firm in the Long Run