Suppose a monopolistically competitive firm is producing at an output level where marginal revenue is less than marginal cost.This firm should _____quantity and _____ price to increase profit or reduce losses.

Question

Quizplus · Accepted Answer

When marginal revenue is less than marginal cost, the firm is not producing at the profit-maximizing level of output. To increase profit or reduce losses, the firm should decrease quantity to decrease costs and increase price to increase revenue. Therefore, the correct choice is to decrease quantity and increase price, which is given in option C.

Suppose a Monopolistically Competitive Firm Is Producing at an Output