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what is the profit-maximizing output condition that a monopolistically competitive firm must satisfy? a) price charged...

what is the profit-maximizing output condition that a monopolistically competitive firm must satisfy? a) price charged is greater than ATC b) price charged is equal to ATC c) price is less than marginal revenue d) marginal revenue is equal to marginal cost
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Answer #1

The profit maximization condition for the monopolistically competitive firm is where the marginal revenue equals the marginal cost, at this level the monopolistically competitive firm charges a price that is well above the marginal cost and the produces too little. The monopolistic competitive firms are price makers and they have got some market power, this is because they are producing the differentiated products. So some people stick with the brand irrespective of the price. 4

Ans: d). Marginal revenue equals marginal cost.

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