For a monopolistically competitive firm, profit is maximized when it produces at a level of output where
A) ATC P.
B) MC = P.
C) MC = MR.
D) MC ATC.

Question

For a monopolistically competitive firm, profit is maximized when it produces at a level of output where
A) ATC > P.
B) MC = P.
C) MC = MR.
D) MC > ATC.

Quizplus · Accepted Answer

Profit is maximized for any firm, including a monopolistically competitive firm, when marginal cost (MC) equals marginal revenue (MR). This is because at this point, the cost of producing one more unit is exactly equal to the revenue gained from selling that unit, ensuring no additional profit can be made from increasing or decreasing production.

For a Monopolistically Competitive Firm, Profit Is Maximized When It