Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18.The profit-maximizing firm should

A) raise output.
B) lower output.
C) keep output constant.
D) The firm should take none of these actions.

Question

Brittney Roberts · Accepted Answer

Final Answer : B, Explanation :  In monopolistic competition, the profit-maximizing output level occurs where marginal revenue (MR) equals marginal cost (MC). In this case, since MR ($15) is less than MC ($18), the firm is overproducing and incurring losses on the last unit produced. To maximize profits, the firm should decrease output until MR equals MC. Therefore, the correct choice is to lower output, which is option B.

Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18.The profit-maximizing firm should

A) raise output.
B) lower output.
C) keep output constant.
D) The firm should take none of these actions.

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Learning Objectives

Related questions

Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18.The profit-maximizing firm shouldA) raise output.B) lower output.C) keep output constant.D) The firm should take none of these actions.

Definitions

Learning Objectives

Learning Objectives

Related questions

Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18.The profit-maximizing firm should

A) raise output.
B) lower output.
C) keep output constant.
D) The firm should take none of these actions.