If a firm operating in monopolistic competition is producing a quantity at which _,then the marginal decision rule tells us that profit _.

A) MC > MR;can be increased by increasing production
B) MC < MR;can be increased by decreasing production
C) MC < MR;can be increased by increasing production
D) MC > MR;is maximized

Question

If a firm operating in monopolistic competition is producing a quantity at which _____,then the marginal decision rule tells us that profit _____.

A) MC > MR;can be increased by increasing production
B) MC < MR;can be increased by decreasing production
C) MC < MR;can be increased by increasing production
D) MC > MR;is maximized

Javier Mueses · Accepted Answer

Final Answer : C, Explanation :  In monopolistic competition, a firm produces at a point where marginal cost (MC) equals marginal revenue (MR) but MC is less than MR. This is because the firm has some market power to set a higher price than marginal cost, but faces competition from other firms producing similar products. Therefore, if a firm is producing at a quantity where MC < MR, it can increase profit by increasing production because the additional revenue generated by selling one more unit is greater than the additional cost incurred in producing that unit.

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