Asked by vidya sagar on Jul 13, 2024
Verified
A monopolistically competitive firm ________ where marginal revenue equals marginal cost.
A) minimizes average total cost
B) maximizes revenues
C) minimizes average variable cost
D) maximizes profits
Marginal Revenue
The additional income received from selling one more unit of a product.
Marginal Cost
The additional financial outlay required for producing another unit of a product or service.
Maximizes Profits
A strategy or condition where a business adjusts its operations, production, and pricing to achieve the highest possible financial gain.
- Understand the rule of profit maximization (MR = MC) for firms in monopolistic competition and its consequences for their operational activities.
- Evaluate the efficiency and outcome of monopolistic competition in both the short and long run.
Verified Answer
KF
Keyan FarahmandJul 19, 2024
Final Answer :
D
Explanation :
In both monopolistic competition and perfect competition, firms maximize profits where marginal revenue equals marginal cost. This principle is a fundamental rule for profit maximization in economics, applying across different market structures.
Learning Objectives
- Understand the rule of profit maximization (MR = MC) for firms in monopolistic competition and its consequences for their operational activities.
- Evaluate the efficiency and outcome of monopolistic competition in both the short and long run.
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