These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm will produce:
A)where MR = MC and will charge according to ATC.
B)where MR = MC and will charge according to D.
C)where D = MC and will charge according to MR.
D)where D = MC and will charge according to ATC.

Question

These are the cost and revenue curves associated with a monopolistically competitive firm.  According to the graph shown,the monopolistically competitive firm will produce:
A)where MR = MC and will charge according to ATC. 
B)where MR = MC and will charge according to D. 
C)where D = MC and will charge according to MR. 
D)where D = MC and will charge according to ATC.

Quizplus · Accepted Answer

In a monopolistically competitive market, the firm will produce where marginal revenue (MR) equals marginal cost (MC) to maximize profits. In the given graph, this occurs at output level Q1, where MR intersects with MC. The firm will then charge the corresponding price at point P1 on the demand curve (D), which is the highest price consumers are willing to pay for that quantity. Therefore, the correct answer is B, where MR = MC and the firm will charge according to D.

These Are the Cost and Revenue Curves Associated with a Monopolistically