Figure: Profit Maximization in Monopolistic Competition (Figure: Profit Maximization in Monopolistic Competition) In panel A of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are ________ and _.
A)S; M
B)P; M
C)P; Q
D)T; Q

Question

Figure: Profit Maximization in Monopolistic Competition  (Figure: Profit Maximization in Monopolistic Competition) In panel A of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are ________ and _.
A)S; M 
B)P; M 
C)P; Q 
D)T; Q

Quizplus · Accepted Answer

In monopolistic competition, the profit-maximizing price occurs where marginal revenue (MR) equals marginal cost (MC), indicated by the intersection of the MR and MC curves. The profit-maximizing quantity occurs at the output level where MR=MC. In panel A of the figure, this occurs at output level Q and price P, where the MR and MC curves intersect. Therefore, the answer is choice C.