The profit-maximising rule for a firm in a monopolistically competitive market is to select the quantity at which:

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, the firm can exert some control over the price due to product differentiation. Thus, the profit-maximising quantity is where marginal revenue (MR) equals marginal cost (MC). This is because producing any additional unit beyond this point will cost more than the revenue it generates, leading to a decrease in profits. Therefore, the correct answer is B, where the firm produces the quantity where MR=MC.

The Profit-Maximising Rule for a Firm in a Monopolistically Competitive