Exhibit 9-1 A monopolistic competitive firm

As presented in Exhibit 9-1, the short-run profit-maximizing output for the monopolistic competitive firm is:

Question

Exhibit 9-1 A monopolistic competitive firm

As presented in Exhibit 9-1, the short-run profit-maximizing output for the monopolistic competitive firm is:

Quizplus · Accepted Answer

The short-run profit-maximizing output occurs where marginal revenue (MR) equals marginal cost (MC). In the exhibit, the MC curve intersects the MR curve at Q = 400 units per day. At this output level, the firm can charge a price of P = $20 per unit, which is above the average total cost (ATC) curve. Therefore, the firm earns a positive economic profit. Outputs lower than 400 units would result in MR > MC, while outputs higher than 400 units would result in MC > MR.

Exhibit 9-1 a Monopolistic Competitive Firm