A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms maximize profit where marginal revenue (MR) equals marginal cost (MC). Since the firm's MR ($6.00) is greater than its MC ($5.00), it can increase its profit by producing more. Therefore, the firm should increase the level of output.

A Monopolistically Competitive Firm Is Producing at a Short-Run Output