A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, a firm may choose to operate on any portion of its marginal cost curve, including the upward-sloping portion. This is because firms in this type of market have some degree of market power and can set prices above their marginal costs. However, operating on the upward-sloping portion of the marginal cost curve may not be the most profitable choice for the firm.

A Profit-Maximizing Firm in a Monopolistically Competitive Market Always Operates