Assume Price Exceeds Average Variable Cost Over the Relevant Range

question 161

Multiple Choice

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should

• A)continue to produce the same quantity.
• B)increase output.
• C)decrease output.
• D)shut down.

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Definitions:

Manufacturer Brands

Brands owned and managed by the manufacturer. Also known as national brands.

Private-label Brands

Brands owned by a retailer or supplier but not manufactured by them, often positioned as lower-cost alternatives to national brands.

House-labeled Wine

Wine that is branded by the retailer or restaurant selling it, rather than the producer.

Brand Extension

The strategy of using an established brand name on new products or services to leverage existing brand equity and expand market reach.