The monopolistically competitive seller maximizes profit by producing at the point where:

• A. marginal revenue equals average revenue
• B. price equals marginal cost
• C. average total cost is minimized
• D. marginal cost equals marginal revenue

Answer: (D)

Verified step by step guidance

1. Understand the profit maximization condition for a monopolistically competitive firm: it occurs where marginal revenue (MR) equals marginal cost (MC).
2. Recall that marginal revenue (MR) is the additional revenue gained from selling one more unit of output, while marginal cost (MC) is the additional cost of producing one more unit.
3. Recognize that average revenue (AR) equals price (P) in this market structure, but profit maximization does not occur where MR equals AR or where price equals MC directly.
4. Note that minimizing average total cost (ATC) is related to productive efficiency, but monopolistically competitive firms do not necessarily produce at this point when maximizing profit.
5. Therefore, the key condition to find the profit-maximizing output is to set MR equal to MC and solve for the quantity produced.