A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
A)marginal cost exceeds marginal revenue
B)average revenue equals marginal cost
C)price exceeds marginal cost
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, a firm has some power to raise prices above the marginal cost in order to maximize profits. Therefore, choice C is correct as price exceeds marginal cost. Choice A is incorrect because a profit-maximizing firm in any market structure produces where marginal cost equals marginal revenue. Choice B is incorrect because in a monopolistically competitive market, average revenue is greater than marginal revenue.

A Profit-Maximizing Firm in a Monopolistically Competitive Market Is Characterized