Asked by Trent Franklin on Jul 11, 2024
Verified
(Figure: Profit Maximization in Monopolistic Competition) Use Figure: Profit Maximization in Monopolistic Competition.In monopolistic competition,long-run equilibrium is characterized by:
A) P > MR.
B) P < MR.
C) P = MR.
D) profit maximization,which occurs where P = MR = MC.
Long-Run Equilibrium
A state in economics where all factors of production are fully adjustable, leading to a situation where no economic agent has an incentive to change its behavior.
Monopolistic Competition
A marketplace setup in which a wide range of companies vend products that are comparable but not clones, enabling some level of market sway.
Profit Maximization
The process by which a firm determines the price and output level that returns the greatest profit.
- Identify the utilization of the profit-maximization condition (MR = MC) among enterprises in markets characterized by monopolistic competition.
Verified Answer
AN
ADGN Noor Aida Binti Zainal AbidinJul 15, 2024
Final Answer :
A
Explanation :
In monopolistic competition, the demand curve faced by a firm is downward sloping, meaning that to sell more, the firm must lower its price. This results in a situation where the price (P) a firm charges for its product is greater than the marginal revenue (MR) it receives from selling one more unit, because lowering the price to sell one more unit reduces the revenue gained from units that could have been sold at a higher price. Therefore, P > MR characterizes monopolistic competition.
Learning Objectives
- Identify the utilization of the profit-maximization condition (MR = MC) among enterprises in markets characterized by monopolistic competition.