The monopolistically competitive firm maximizes profit by producing to the point at which

Question

Quizplus · Accepted Answer

In monopolistic competition, the firm maximizes its profit by producing the quantity of output where marginal revenue (MR) is equal to marginal cost (MC). This is because MR represents the additional revenue gained by selling one more unit of output, while MC represents the additional cost incurred by producing one more unit of output. When MR > MC, the firm can increase profit by producing more, and when MC > MR, the firm can increase profit by producing less. So, the optimal level of output is where MR = MC. Choice (B) is the only option that reflects this condition.

The Monopolistically Competitive Firm Maximizes Profit by Producing to the Point