If a monopolistic competitor is producing an output for which marginal revenue is $40 and marginal cost is $32 to maximize profits the firm should

Question

Quizplus · Accepted Answer

For a monopolistic competitor, the profit-maximizing rule is to produce the output level where marginal revenue (MR) equals marginal cost (MC). In this case, MR = $40 and MC = $32. Since MR is greater than MC, the firm should increase its level of output in order to increase profit. Therefore, the answer is D: increase the level of output.

If a Monopolistic Competitor Is Producing an Output for Which