Question

A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer thatA. the profits of the firm are negative.B. firms are likely to leave this market in the long run.C. the firm is currently maximizing its profit.D. All of the above are correct.

Answer 1

Answer:

C. the firm is currently maximizing its profit

Explanation:

The company will maximize profit at the point at which marginal cost equals marginal revenue.

In this case this requirement is fulfil:

marignal revenue = income for an additional unit = $12

marginal cost = cost for producing an additional unit = $12

Thus, we can stablish the monopoly is on profit maximizing point.