Asked by Katrina Kazandjian on May 16, 2024
Verified
A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.
Profit-Maximizing
A strategy or process by which a business seeks to generate the highest possible profit from its operations, often by adjusting prices, output, or production methods.
Marginal Cost
The increase in cost resulting from the production of an extra unit of a product or service.
- Explain the pricing strategies and profit maximization behavior in monopolistically competitive markets.
Verified Answer
PR
Priyanka RizalMay 22, 2024
Final Answer :
False
Explanation :
In a monopolistically competitive market, firms have some degree of market power due to product differentiation. This allows them to charge a price that is above marginal cost, unlike in perfect competition where price equals marginal cost.
Learning Objectives
- Explain the pricing strategies and profit maximization behavior in monopolistically competitive markets.