If a monopolistically competitive seller's marginal cost is $3.56,the firm will decrease its output if
A) its marginal revenue is less than $3.56.
B) its marginal revenue is equal to $3.56.
C) its marginal revenue is more than $3.56.
D) its average total cost is equal to $4.00.
E) Both answers B and D are correct.

Question

Quizplus · Accepted Answer

A monopolistically competitive seller will decrease its output if its marginal cost is greater than its marginal revenue since producing an additional unit of output will lead to a loss. Therefore, the seller will decrease output until marginal revenue equals marginal cost, which is $3.56 in this case. If marginal revenue is less than $3.56, the seller will decrease its output.

If a Monopolistically Competitive Seller's Marginal Cost Is $3