Multiple Choice
In the above figure, the monopolistically competitive firm earns an economic profit of:
13. Monopolistic Competition
Monopolistic Competition Profit on the Graph
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The firm's profit-maximizing output in monopolistic competition is:
A
100 units
B
40 units
C
60 units
D
80 units
Verified step by step guidance1
Identify the key curves on the graph: Demand (D), Marginal Cost (MC), Average Total Cost (ATC), and Marginal Revenue (MR).
Recall that in monopolistic competition, a firm maximizes profit where Marginal Revenue (MR) equals Marginal Cost (MC).
Locate the point on the graph where the MR curve intersects the MC curve. This intersection determines the profit-maximizing quantity.
From the intersection point, draw a vertical line down to the quantity axis to find the profit-maximizing output level.
Verify that this quantity corresponds to the correct answer provided, which is 40 units, by checking the graph's intersection point.
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