A monopolistic competitive firm maximizes profits by producing at the point where
A)total revenue is at a maximum.
B)marginal revenue equals average cost.
C)marginal revenue equals marginal cost.
D)price equals marginal revenue.

Question

Quizplus · Accepted Answer

A monopolistic competitive firm maximizes profits by producing where marginal revenue (MR) equals marginal cost (MC). This is because at that point, producing one more unit will add to revenue (MR), but also add to cost (MC) by the same amount. Therefore, profit is maximized when these two values are equal.

A Monopolistic Competitive Firm Maximizes Profits by Producing at the Point