A monopolistically competitive firm finds its profit-maximizing rate of output by equating

Question

Quizplus · Accepted Answer

A monopolistically competitive firm maximizes profit by producing at a level where marginal revenue (MR) equals marginal cost (MC). This is because MR represents the additional revenue obtained from selling one additional unit, while MC represents the additional cost of producing one additional unit. Therefore, a firm that wants to maximize its profit should produce where the last unit produced adds as much value as it costs.

A Monopolistically Competitive Firm Finds Its Profit-Maximizing Rate of Output