Which of the following statements about a monopolistically competitive firm is TRUE?

Question

Quizplus · Accepted Answer

A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue, similar to a perfectly competitive firm. However, it may not always be able to charge a price equal to marginal cost due to its product differentiation, leading to some pricing power. Therefore, option B is incorrect. Option C also implies that a monopolistically competitive firm does not consider profit maximization, which is incorrect. Option A is false as well, as a monopolistically competitive firm aims to maximize profits, and equating marginal cost to marginal revenue is a necessary condition for this.

Which of the Following Statements About a Monopolistically Competitive Firm