If a firm operating in monopolistic competition is producing a quantity at which _____,then the marginal decision rule tells us that profit _____. A)MC MR;can be increased by increasing production B)MC

Question

If a firm operating in monopolistic competition is producing a quantity at which _____,then the marginal decision rule tells us that profit _____. A)MC > MR;can be increased by increasing production B)MC < MR;can be increased by decreasing production C)MC < MR;can be increased by increasing production D)MC > MR;is maximized

Quizplus · Accepted Answer

In monopolistic competition, a firm produces at a point where marginal cost (MC) equals marginal revenue (MR) but MC is less than MR. This is because the firm has some market power to set a higher price than marginal cost, but faces competition from other firms producing similar products. Therefore, if a firm is producing at a quantity where MC < MR, it can increase profit by increasing production because the additional revenue generated by selling one more unit is greater than the additional cost incurred in producing that unit.

If a Firm Operating in Monopolistic Competition Is Producing a Quantity