For a monopolistically competitive firm, at the profit-maximizing quantity of output, a. price exceeds marginal cost. b. marginal revenue exceeds marginal cost. c. marginal cost exceeds average revenue. d. price equals marginal revenue.
The answer in this case would be option a. or price exceeds marginal cost.
Explanation:
Monopolistic competition is a particular type of market structure where multiple or many firms or companies are producing and selling differentiated or heterogeneous products or services.
A monopolisticially competitive firm maximizes its profit by producing the output level at which the marginal revenue or the additional or incremental revenue obtained from selling one more unit of output is equal to the marginal cost or the additional or incremental cost or expense incurred by the firm or company to produce that one more unit of the output.
The monopolistically competitive firm charges per unit price of the output which is equal to the demand for any particular product or service in the market and higher than both marginal revenue and marginal cost or above the point where both are equal.Hence,the price charged by the monopolistically competitive firm is higher than both marginal cost and marginal revenue of production.
