Exhibit 10-1 A monopolistic competitive firm

As presented in Exhibit 10-1, the short-run profit-maximizing output for the monopolistic competitive firm is:

Question

Exhibit 10-1 A monopolistic competitive firm

As presented in Exhibit 10-1, the short-run profit-maximizing output for the monopolistic competitive firm is:

Quizplus · Accepted Answer

In a monopolistically competitive market, firms face a downward-sloping demand curve, which means they must lower their price in order to increase their quantity sold. The short-run profit-maximizing output is where marginal revenue (MR) equals marginal cost (MC). In Exhibit 10-1, this occurs at a quantity of 400 units per day, where MR intersects with MC. At this level of output, the firm can charge a price above its marginal cost and earn a positive economic profit. Therefore, the best choice is C, 400 units per day.

Exhibit 10-1 a Monopolistic Competitive Firm