A firm in a monopolistically competitive industry is currently producing where marginal revenue exceeds marginal cost. What does this information tell us about the firm?
A) It is producing too much.
B) It is operating at a loss.
C) It is not maximizing profits.
D) It is not minimizing costs.

Question

Quizplus · Accepted Answer

If the firm is producing where marginal revenue exceeds marginal cost, it means that it could increase profits by producing more. Therefore, the firm is not maximizing profits.

A Firm in a Monopolistically Competitive Industry Is Currently Producing