Figure 13-11

-Refer to Figure 13-11.What is the monopolistic competitor's profit-maximizing output?
A)Q₁ units
B)Q₂ units
C)Q₃ units
D)Q₄ units

Question

Figure 13-11
 
-Refer to Figure 13-11.What is the monopolistic competitor's profit-maximizing output?
A)Q₁ units 
B)Q₂ units 
C)Q₃ units 
D)Q₄ units

Quizplus · Accepted Answer

The monopolistic competitor's profit-maximizing output is where marginal revenue (MR) equals marginal cost (MC). In this case, Q₂ units is where MR=MC. At any output level below Q₂, the firm can increase profits by increasing production since MR>MC. At any output level above Q₂, the firm can increase profits by producing less since MR<MC. Therefore, Q₂ is the profit-maximizing output level.

Figure 13-11 -Refer to Figure 13-11.What Is the Monopolistic Competitor's Profit-Maximizing Output