The monopolistically competitive firm maximizes profit by producing to the point at which

Question

Quizplus · Accepted Answer

In monopolistic competition, the firm faces a downward-sloping demand curve (AR) and therefore, MR is also downward-sloping. To maximize profit, the firm must produce where MR = MC. This is because producing more units beyond this point would lead to a higher cost (MC) than the additional revenue (MR) earned from selling those units. Therefore, choice B (MC = MR) is the correct answer.

The Monopolistically Competitive Firm Maximizes Profit by Producing to the Point