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    Harron Remigio Adjok
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    A firm in monopolistic competition faces a downward sloping demand curve and can earn profits in the short run by producing where marginal revenue is equal to marginal cost. If the firm produces more than the profit-maximizing quantity, it will face losses as marginal revenue declines below average cost. To avoid losses, the firm must reduce production to where marginal revenue equals average cost.

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    A firm in monopolistic competition faces a downward sloping demand curve and can earn profits in the short run by producing where marginal revenue is equal to marginal cost. If the firm produces more than the profit-maximizing quantity, it will face losses as marginal revenue declines below average cost. To avoid losses, the firm must reduce production to where marginal revenue equals average cost.

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    2 views2 pages

    Eonomics

    Uploaded by

    Harron Remigio Adjok
    A firm in monopolistic competition faces a downward sloping demand curve and can earn profits in the short run by producing where marginal revenue is equal to marginal cost. If the firm produces more than the profit-maximizing quantity, it will face losses as marginal revenue declines below average cost. To avoid losses, the firm must reduce production to where marginal revenue equals average cost.

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    DEMAND CURVE FOR A FIRM ENJOYING PROFITS IN A MONOPOLISTIC COMPETITION

    DEMAND CURVE OF A FIRM LOSING PROFITS DUE TO MONOPOLISTIC COMPETITION

    d1 MC F MR E1 d1
    QUANTITY

    AC

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