Figure 6.1 Demand and Cost Conditions for a Monopolistically Competitive Firm

-Refer to Figure 6.1. How much output should this monopolistic competitive firm produce in order to maximize profits?

Question

Figure 6.1 Demand and Cost Conditions for a Monopolistically Competitive Firm
 
-Refer to Figure 6.1. How much output should this monopolistic competitive firm produce in order to maximize profits?

Quizplus · Accepted Answer

In monopolistic competition, a firm maximizes profit where marginal cost (MC) equals marginal revenue (MR). Without seeing Figure 6.1, the general principle is that the profit-maximizing output level is where these two curves intersect. Assuming choice C (8) is where MC = MR, that would be the correct output level for profit maximization.

Figure 61 Demand and Cost Conditions for a Monopolistically Competitive Firm