In a monopolistically competitive market, the seller maximizes profits by:

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, the seller maximizes profits by setting price where marginal revenue (MR) equals marginal cost (MC). This is because in such a market, there is some level of market power, which allows the seller to charge a price higher than the marginal cost. However, if the price is set too high, it will result in lower demand, and if set too low, it will result in lower profits. Therefore, the optimal price is where MR=MC, as it ensures that the seller is maximizing revenue while keeping costs in check.

In a Monopolistically Competitive Market, the Seller Maximizes Profits By