To maximize its profit,a monopolistically competitive firm produces the output level at which ____.
A) its price elasticity of demand equals one
B) MR = MC
C) ATC is minimized
D) MR = AVC

Question

Quizplus · Accepted Answer

In order to maximize profit, a monopolistically competitive firm should produce the output level at which marginal revenue (MR) is equal to marginal cost (MC). This is because producing any additional units beyond this output level would result in a decrease in profit. However, it is important to note that in the long run, firms in monopolistic competition will only earn zero economic profit as new firms enter the market and competition increases.

To Maximize Its Profit,a Monopolistically Competitive Firm Produces the Output