The Profit-Maximizing Rule MC = MR Is Followed by Firms

question 227

Multiple Choice

The profit-maximizing rule MC = MR is followed by firms operating in:

• A)monopolistic competition but not perfect competition.
• B)perfect competition but not monopolistic competition.
• C)either monopolistic competition or perfect competition,depending on the costs of production.
• D)both monopolistic competition and perfect competition.

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Definitions:

External Costs

Costs that are not borne by the parties involved in economic transactions but are imposed on others, such as environmental pollution.

External Benefits

Advantages that accrue to individuals or society indirectly participating in an economic transaction or activity.

Market Outcome

The result of all buyers' and sellers' interactions in a market, determined by factors like price, quantity, and quality of goods and services.

External Costs

External costs, also known as negative externalities, are the costs experienced by third parties who are not involved in an economic transaction, often not reflected in market transactions.