When a monopolistically competitive firm is maximizing its profit:
A)marginal revenue is also maximized.
B)average revenue exceeds marginal revenue.
C)total revenue declines to zero.
D)marginal revenue equals average revenue.

Question

When a monopolistically competitive firm is maximizing its profit: 
A)marginal revenue is also maximized.
B)average revenue exceeds marginal revenue.
C)total revenue declines to zero.
D)marginal revenue equals average revenue.

Quizplus · Accepted Answer

In monopolistic competition, firms maximize profit where marginal cost equals marginal revenue, and average revenue (price) typically exceeds marginal revenue due to the downward-sloping demand curve.

When a Monopolistically Competitive Firm Is Maximizing Its Profit