Asked by Justin Brady on May 04, 2024
Verified
The monopolistically competitive seller maximizes profit by producing at the point where:
A) total revenue is at a maximum.
B) average costs are at a minimum.
C) marginal revenue equals marginal cost.
D) price equals marginal revenue.
Marginal Cost
The additional cost incurred from producing one more unit of a good or service.
Marginal Revenue
The additional income received from selling one more unit of a good or service.
Profit Maximizes
The process or strategy of adjusting production and operations to achieve the highest possible profit.
- Analyze the profit-maximizing behavior of monopolistically competitive firms.
Verified Answer
ZK
Zybrea KnightMay 07, 2024
Final Answer :
C
Explanation :
The monopolistically competitive seller maximizes profit by producing at the point where marginal revenue equals marginal cost. This is because at this point, the seller is producing the quantity of output where the last unit produced generates the same amount of revenue as the cost to produce it. Any quantity produced beyond this point would result in a decrease in profits as the cost to produce each additional unit exceeds the revenue earned from selling it. Therefore, the option where marginal revenue equals marginal cost is the best choice.
Learning Objectives
- Analyze the profit-maximizing behavior of monopolistically competitive firms.
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