If a monopolistically competitive firm is incurring losses, then at the profit-maximizing output amount:

Question

Quizplus · Accepted Answer

If a monopolistically competitive firm is incurring losses, its price must be less than its average total cost curve. At the profit-maximizing output, the firm produces where marginal revenue equals marginal cost, but the price charged will be lower than the average total cost. This is because the firm faces competition, so it cannot charge a higher price to cover its costs.

If a Monopolistically Competitive Firm Is Incurring Losses, Then at the Profit-Maximizing