If a Firm Under Monopolistic Competition Is Producing a Quantity

question 36

Multiple Choice

If a firm under monopolistic competition is producing a quantity that generates MC < MR, then the marginal decision rule tells us that profit:

• A) can be increased by increasing production.
• B) can be increased by decreasing production.
• C) can be increased by increasing the price.
• D) is maximized only if MC = P.

---

Definitions:

Work in Process

Goods in various stages of production, not yet completed but not as raw materials, within a manufacturing process.

Fixed Manufacturing Overhead Standards

Pre-determined benchmarks for the fixed costs involved in the production process, not varying with the level of output.

Budgeted Fixed Manufacturing Overhead

The estimated fixed costs involved in manufacturing that do not change with the level of production or sales volume.

Standard Cost System

A cost accounting system that assigns fixed costs to products based on predefined standards, facilitating budgeting and variance analysis.