How does a monopolistic competitor choose its profit-maximizing quantity of output?
a. The firm will produce at a level of output where marginal revenue is less than marginal cost.
b. The firm will produce at a level of output where marginal cost equals demand.
c. The firm will produce at a level of output where marginal revenue equals marginal cost.
Meaning of Monopolistic Competition
Monopolistic competition is a situation which lies in the middle of Perfect Competition and Monopoly. And it is often found in real world. Monopolistic competition is a market structure wherein many firms offer (or sell) products or services that are similar (not same), but not perfect substitutes. The barriers to entry and exit in such competition are low, and the decisions of any one firm do not directly affect those of its competitors.
Real life example of monopolistic competition is toothpaste industry, beer industry, garments industry and many more. Different producers compete on quality of toothpaste as much as price. Product differentiation is a key element of the business. All Toothpastes of all companies are similar but not same. Every tootpaste company has some uniqueness in its product.
The concept of monopolistic competition was put forth by Edward Chamberlin of Harvard University and Joan Robinson of Cambridge University.
Answer and Explanation: 1
The right answer is option C i.e. Monopolistic competitor chooses its profit-maximizing quantity of output at a level of output where marginal revenue...
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fromChapter 3 / Lesson 56
Learn the monopolistic competition definition with examples. Study monopolistic competition vs. perfect competition and other market types to learn the differences.