Toby operates a small deli downtown.The deli industry is monopolistically competitive.In the long run,Toby will produce where:

Question

Quizplus · Accepted Answer

In the long run, in the monopolistically competitive market, firms earn normal profits. Therefore, Toby will produce where marginal revenue equals marginal cost to maximize profits. This is because producing units until marginal revenue equals marginal cost allows the firm to maximize profit by producing at a level where the additional revenue earned by producing an additional unit is equal to the additional cost incurred by producing that unit.

Toby Operates a Small Deli Downtown