Answer:
D. both the quantity of output to produce and the price at which it will sell its output.
Explanation:
A monpolistically competitive firm chooses the price and the quantity to produce. This decision is guided by market conditions and the goal to maximise profit.
A monopolistic competitive firm has a downward sloping demand curve just like a monopoly, so the monpolistically competitive firm chooses the quantity that maximises its profit and then chooses price.
A downward sloping demand curve indicates that quantity demanded is sensitive to price. The higher the price, the lower the quantity demanded.
A monpolistically competitive firm is a firm that has features of both a monopoly and a competitive firm.
The ability of a monpolistically competitive firm to set prices makes it a price maker.
Just like a monopoly, a monopolistically competitive firm has the following features:
1. It faces of downward sloping demand curve.
2. It sets the price for its products.
Just like a perfect competition, a monopolistically competitive firm has the following features:
1. No barriers to entry or exit.
2. There are many buyers and sellers
Other features of a monpolistically competitive firm are:
1. Firms sell differentiated products
2. Firms engage in non price competition.
