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Figure: Monopolistic Competitor
-(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic Competitor maximizes its returns, it will:
A) earn a positive economic profit.
B) break even.
C) incur a loss.
D) incur a loss equal to its MR.

Question

Use the following to answer question:
Figure: Monopolistic Competitor 
-(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic Competitor maximizes its returns, it will:
A) earn a positive economic profit. 
B) break even. 
C) incur a loss. 
D) incur a loss equal to its MR.

Quizplus · Accepted Answer

A monopolistic competitor maximizes its returns where marginal cost (MC) equals marginal revenue (MR). If the price at this output level is above average total cost (ATC), the firm earns a positive economic profit.

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