If a Monopolistically Competitive Firm Wants to Maximize Profits, It

question 116

Multiple Choice

If a monopolistically competitive firm wants to maximize profits, it will increase production until:

• A) marginal revenue > average variable cost.
• B) marginal revenue = average total cost.
• C) marginal cost > marginal revenue.
• D) marginal revenue = average revenue.
• E) marginal revenue = marginal cost.

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Definitions:

Erosion

In finance, it refers to the gradual decline of an asset's value, or the negative impact one investment can have on the value of an existing investment.

Incremental Cash Flows

The additional cash flow a company generates from undertaking a new project, considering only the revenues and costs directly caused by the project.

Incremental Cash Flows

The additional cash flow a business receives from undertaking a new project.

Sunk Costs

Outlays already made that cannot be refunded or retrieved.