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Author Question: A firm in monopolistic competition maximizes its profit by producing where its price is equal to its ... (Read 85 times)

bclement10

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on: Jun 29, 2018
A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost. Is the previous statement correct or incorrect?
 
  What will be an ideal response?

Question 2

A perfectly competitive firm is called a price maker because all the firms together must make the market price. Is the previous statement correct or incorrect? Briefly explain your answer.
 
  What will be an ideal response?


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mistyjohnson

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The statement is incorrect. A firm in monopolistic competition maximizes its profit by producing where its marginal revenue equals its marginal cost. Because the marginal revenue is less than the price for a firm in monopolistic competition, it definitely is not the case that the firm produces where its price equals its marginal cost

Answer to Question 2

The statement is false. A perfectly competitive firm is called a price taker because the firm must take whatever price the market determines. Any single firm's actions cannot affect the market price.


bclement10

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Reply 2 on: Jun 29, 2018
Gracias!

sailorcrescent

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Reply 3 on: Yesterday
Excellent

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