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Chapter 1: Q.7 (page 9)

How does a monopolistic competitor choose its

profit-maximizing quantity of output and price?

Short Answer

Expert verified

A monopolistic competitor will find the quantity where marginal revenue is equal to marginal cost.

Step by step solution

01

Step 1. Definition

A monopoly refers to exclusive possession of a market by a supplier for which there is no substitute. At this point, the supplier is capable of establishing the price of the product without the trepidation of competition from other firms or other firms' substitutes.

02

Step 2. Explanation

A monopolist determines the profit-maximizing quantity and pricing in a monopolistic market. The monopolist rival's downward shift curve can be seen here.As a result, at the point when marginal cost and marginal revenue are equal, he chooses a combination of quantity and price, as well as the demand curve determined from it.

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