Question

Graphically, how does a monopolistically competitive firm determine its profit-maximizing price? Question 7 options: It accepts the price set by the industry-wide forces of supply and demand. The firm's pricing structure is set by government regulators. Graphically, it finds the place where MR = MC and charges the price directly to the left of that point. The firm determines its profit-maximizing output and then charges the price associated with the point on its demand curve directly above that quantity.

Answer 1

Answer:

The correct answer is the last option: The firm determines its profit-maximizing output and then charges the price associated with the point on its demand curve directly above that quantity.

Explanation:

To begin with, the monopolistically competitive firm is working in the market that determines its profit-maximizing price by first determining its output level in the point where it marginal costs equals its marginal revenue and then it charges the price that finds itself above that quantity level determined previously by the output level and that is in the average revenue curve that finds it above the marginal revenue curve