Question

In the long run a monopolistic competitor

A. sets P>MC.
B. produces where P=AC.
C. set MR=MC
. D. All of the above.

Answer 1

In a monopolistically competitive market, the profit-maximizing rule is to set MR=MC. This ensures that the firm is earning profits.

Step-by-step explanation:

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC and price is higher than marginal revenue. So, the correct answer to the question is C. set MR=MC. When a monopolistically competitive firm sets MR=MC, it maximizes its profit by producing the quantity at which marginal revenue equals marginal cost. This results in a higher price compared to the marginal cost and ensures that the firm is earning profits.