In Order to Maximize Profits, a Firm in Monopolistic Competition

question 39

Multiple Choice

In order to maximize profits, a firm in monopolistic competition will likely produce:

• A)at the output level at which marginal cost equals average total cost.
• B)at the output level at which marginal cost is greater than marginal revenue.
• C)at the output level at which marginal cost equals marginal revenue.
• D)at the output level at which marginal cost equals price.

---

Definitions:

Short Sell

The practice of selling a borrowed security with the intention of buying it back later at a lower price to profit from the price difference.

Arbitrage Pricing Theory

A financial model that estimates the return of an asset by considering multiple risk factors and their respective risk premiums, excluding unsystematic risk through diversification.

Nonsystematic Risk

The risk associated with a specific issuer of a security, also known as idiosyncratic or unsystematic risk, that can be reduced through diversification.

Well-Diversified Portfolio

An investment portfolio that includes a mix of assets (e.g., stocks, bonds, real estate) to reduce risk through diversification.