Asked by Diana Muñoz on May 11, 2024
Verified
A monopolistically competitive firm can minimize its losses by producing where ________ as long as ________.
A) MR = MC; P > AVC
B) P = MC; P > ATC
C) P = ATC; P > MR
D) P = MR; P > AFC
Marginal Revenue
The extra income a company earns by selling an additional unit of a product or service.
Marginal Cost
The increase in cost that arises from producing one additional unit of a good or service; it varies depending on the level of production.
Average Variable Cost
The total variable costs divided by the quantity of output produced, representing the average cost of producing each unit excluding fixed costs.
- Examine and appraise the profit maximization actions of firms within monopolistically competitive sectors over short-run and long-run intervals.
Verified Answer
SC
Savanna CassidyMay 18, 2024
Final Answer :
A
Explanation :
In a monopolistically competitive market, a firm minimizes its losses or maximizes its profits by producing at the quantity where marginal revenue (MR) equals marginal cost (MC), provided that the price (P) is above average variable cost (AVC) to ensure the firm covers its variable costs.
Learning Objectives
- Examine and appraise the profit maximization actions of firms within monopolistically competitive sectors over short-run and long-run intervals.