The monopolistically competitive firm maximizes short-run profit by following which of the following rules?
A)MC = Demand.
B)MC = P.
C)MC = MR.
D)MC MR.

Question

The monopolistically competitive firm maximizes short-run profit by following which of the following rules?
A)MC = Demand.
B)MC = P.
C)MC = MR.
D)MC > MR.

Quizplus · Accepted Answer

In the short-run, a monopolistically competitive firm maximizes profit by producing at the point where marginal revenue (MR) equals marginal cost (MC). This is because, in the short-run, the firm can adjust its output but not its fixed costs, which include things like rent and equipment. Therefore, the firm should produce up to the point where the marginal cost of producing one more unit is equal to the marginal revenue gained from selling one more unit. This helps to ensure that the firm is operating at the most efficient level, producing the most output at the lowest cost.

The Monopolistically Competitive Firm Maximizes Short-Run Profit by Following Which