Refer to the accompanying graph. The short-run profit-maximizing output for the monopolistic competitive firm is:

Question

Quizplus · Accepted Answer

The profit-maximizing output is determined where marginal revenue (MR) equals marginal cost (MC), which is at 400 units per day in this case. At this output level, the monopolistic competitive firm is able to charge a price above its marginal cost, resulting in positive economic profits. At any output level below or above this point, the firm's profits will be lower due to either higher costs or reduced market power.

Refer to the Accompanying Graph