A Monopolistically Competitive Firm Maximizes Profit in the Short Run

question 254

Multiple Choice

A monopolistically competitive firm maximizes profit in the short run by producing where

• A)price is less than marginal cost.
• B)price is less than marginal revenue.
• C)price is less than average revenue.
• D)price is greater than marginal cost.

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Definitions:

Producer Surplus

The difference between the amount producers are willing to supply a good for and the actual amount they receive (or market price).

Minimum Price

The lowest possible price at which a product or service can be sold, often regulated by governments to protect producers or consumers.

Buyer Surplus

The difference between the highest price a consumer is willing to pay for a good or service and the actual price they pay.

Seller Surplus

The difference between the amount sellers are willing to accept for a good or service and the amount they actually receive.