The profit-maximizing rule,expressed as _,is adhered to by firms operating in _ markets.

A) MC > MR;monopolistically competitive but not perfectly competitive
B) MC = MR;both monopolistically competitive and perfectly competitive
C) MC > MR;perfectly competitive but not monopolistically competitive
D) MC = MR;perfectly competitive but not monopolistically competitive

Question

The profit-maximizing rule,expressed as _____,is adhered to by firms operating in _____ markets.

A) MC > MR;monopolistically competitive but not perfectly competitive
B) MC = MR;both monopolistically competitive and perfectly competitive
C) MC > MR;perfectly competitive but not monopolistically competitive
D) MC = MR;perfectly competitive but not monopolistically competitive

Phillippa Schaefer · Accepted Answer

Final Answer : B, Explanation :  The profit-maximizing rule is MC=MR, which applies to both monopolistically competitive and perfectly competitive markets. In monopolistically competitive markets, firms have some market power and can set prices slightly above marginal cost, but still face competition from other firms. In perfectly competitive markets, firms are price takers and must sell at the market price determined by the intersection of supply and demand, where MC=MR. Therefore, the rule MC=MR is applicable to both types of markets.

Definitions

Learning Objectives

Learning Objectives

Related questions