The following figure shows the cost curves (ATC, average total cost; MC, marginal cost) of a firm that operates in a monopolistic competition market, as well as the demand (D) facing the firm and the marginal revenue (MR) of this firm.

-Refer to the figure above.What is the profit-maximizing price that this firm should charge in the short run?

Question

The following figure shows the cost curves (ATC, average total cost; MC, marginal cost) of a firm that operates in a monopolistic competition market, as well as the demand (D) facing the firm and the marginal revenue (MR) of this firm.
 
-Refer to the figure above.What is the profit-maximizing price that this firm should charge in the short run?

Quizplus · Accepted Answer

The profit-maximizing output is where MR = MC, which occurs at an output of 8 units in this figure. At this output, the firm's average total cost is $6.5, which means the price that the firm should charge is $6.5 to maximize profit.

The Following Figure Shows the Cost Curves (ATC, Average Total