If a firm operating within monopolistic competition is producing a quantity that generates MC = MR, then the marginal decision rule tells us that profit:
A)is maximized.
B)can be increased by decreasing production.
C)can be increased by decreasing the price.
D)is maximized only if MC = P.

Question

Quizplus · Accepted Answer

In monopolistic competition, the profit is maximized where MC = MR. Therefore, if the firm is already producing at a quantity where MC = MR, then they are maximizing their profit. Any deviation from this quantity would lead to a decrease in profit. Therefore, the best choice is A, which states that profit is maximized.

If a Firm Operating Within Monopolistic Competition Is Producing a Quantity