Question

This firm operates in a monopolistic competitive industry. When the firm maximizes its profits: a. How much output does it produce and why? b. How much do consumers pay for a unit of the good? How much does the unit cost on average to the firm? c. What is the MR curve and why it is decreasing?

Answer 1

Answer:

The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output, and the firm can make higher profits by expanding output.

Explanation: