Asked by Alanis Matthews on May 04, 2024
Verified
Refer to Figure 15.2. At We Do Hair, a monopolistically competitive firm, the ________ perm is $32.
A) average total cost of a
B) marginal cost of a
C) profit on each
D) profit-maximizing price for a
Monopolistically Competitive
A market structure in which many companies sell products that are similar but not identical, allowing for competition based on quality, price, and marketing.
Profit-Maximizing Price
The price level at which a company can sell its product or service to achieve the highest possible profit, taking into account the cost of production and market demand.
Average Total Cost
The total cost of production divided by the number of units produced, often used to identify the most efficient scale of production.
- Derive the output levels and prices that result in the highest profits for monopolistically competitive firms.
- Recognize the effect of supply and demand on pricing and output in monopolistically competitive industries.
Verified Answer
SJ
Suzette JonesMay 09, 2024
Final Answer :
D
Explanation :
In a monopolistically competitive market, firms maximize profit where marginal revenue equals marginal cost. The profit-maximizing price is then determined by the demand curve at that quantity, which is not directly related to average total cost, marginal cost, or profit per unit at that point.
Learning Objectives
- Derive the output levels and prices that result in the highest profits for monopolistically competitive firms.
- Recognize the effect of supply and demand on pricing and output in monopolistically competitive industries.