Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

A) $36.
B) $44.
C) $46.
D) $50.

Monopolistically Competitive

A market structure where many companies sell products that are similar but not identical, allowing for slight differentiation and some pricing power.

Fixed Costs

Costs that do not change with the level of output or activity, such as rent or salaries.

Short Run

A period during which at least one of a firm's inputs is fixed, limiting the firm's ability to adjust production in response to market changes.