Both monopolistically competitive firms and perfectly competitive firms maximize profits
A)by producing where price equals average total cost.
B)by producing where marginal revenue equals average revenue.
C)by producing where marginal revenue equals marginal cost.
D)by producing where price equals average variable cost.

Question

Quizplus · Accepted Answer

Both monopolistically competitive firms and perfectly competitive firms maximize profits by producing where marginal revenue equals marginal cost. This is because at this level of output, the firm is producing the optimal quantity at which the additional revenue generated from producing one more unit (marginal revenue) is equal to the additional cost incurred in producing that unit (marginal cost). This maximizes the firm's profits.

Both Monopolistically Competitive Firms and Perfectly Competitive Firms Maximize Profits