A monopolistically competitive firm produces where demand intersects with average costs.

Question

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A monopolistically competitive firm aims to differentiate its products from competitors and has some control over the price it charges. Therefore, it will generally produce where its demand curve intersects with its average cost curve, just like a perfectly competitive firm. However, the price charged will be higher than the marginal cost due to market power.

A Monopolistically Competitive Firm Produces Where Demand Intersects with Average