Assume that price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $111.11 and marginal cost is $118, then to maximise profits the firm should increase its output.

Question

Quizplus · Accepted Answer

If marginal cost is greater than marginal revenue, the firm is not maximizing profits and should decrease output to increase profitability. In this case, the firm should decrease its output to a point where marginal revenue equals marginal cost to maximize profits.

Assume That Price Exceeds Average Variable Cost Over the Relevant