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The monopolistic firm will be in equilibrium where

The monopolistic firm will be in equilibrium where Correct Answer Marginal revenue = Marginal cost

Monopolistic competition is a type of imperfect competition in which many firms offer products and services that are similar to each other but are not perfect substitutes.Important Points 

Marginal Revenue is the difference in total revenue after changing the rate of sales by one unit.

Marginal Cost is the cost of producing an additional unit of the good.

Key Points

Profit Maximization Rule:

  • Regardless of the type of firm, the Profit Maximization Rule states that when a company wants to maximize its profits, it must choose the output level where Marginal Revenue (MR) equals Marginal Cost (MC) and the Marginal Cost curve is rising.
  • In other words, we can say that a company must produce output up to the level where MR=MC.

Therefore, the Profit maximizing rate of output of a firm is determined by equating Marginal Cost with Marginal Revenue.

Important Points

Reasons why profits are not maximized at points where MR is not equal to MC:

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When MR>MC, then for each additional unit produced revenue will be higher than cost and the company would generate more quantity of goods.

When MR<MC, then for each additional unit produced cost will be higher than revenue and the company would create less quantity of goods.

So the optimal point of production should be at a point where MR=MC.

Related Questions

Marginal cost is equal to marginal revenue, average cost is equal to average revenue, average revenue is equal to marginal revenue and average cost is equal to marginal cost. This is the condition of
1. long period equilibrium for a firm under monopoly
2. short period equilibrium for a firm under oligopoly
3. long period equilibrium
4. long period equilibrium for a firm under perfect competitions
Select the correct answer
The marginal cost is equal is to marginal revenue, the average cost is equal to average revenue, average revenue is equal to marginal revenue, and the average cost is equal to marginal cost. This is the condition of
1. Long-period equilibrium for a firm under monopoly.
2. Short-period equilibrium for a firm under oligopoly.
3. Long-period equilibrium
4. Long-period equilibrium for a firm under perfect competition.
A particular price level, there are no forces tending to move it either up or down, it means
1. the firm is in equilibrium.
2. the price is in equilibrium.
3. the equilibrium price of the firm.
4. the equilibrium price and quantity of a firm.
Select the correct answer
A', 'B' and 'C' are partners in a partnership firm named A, B & C. 'A' retires from the firm without giving any public notice. Thereafter, an existing creditor lends Rs. ten lakh to the firm on the basis of his knowledge that 'A', 'B' and 'C' are the three partners in the firm. This amount remains unpaid by the firm. The creditor wants to recover the unpaid loan amount from the firm.
A, B and C are partners in a firm. C retires and X admitted as a new partner. The firm did not give a public notice on the change but continued its business in its old firm name. Z, a customer of the firm, deals with the firm after the change and the firm becomes indebted to him:
Which two of the following statements are true? a) A simple monopoly firm always earns super normal profit  b) Sweezy's kinked demand curve model is the best known model explaining relatively more satisfactory behaviour of oligopoly firm for price rigidity  c) A perfectly competitive firm is price - taker  d) Firms under monopolistic competition earn only normal profits  Choose the correct option from those below 
Which two of the following statements are true?
I. A simple monopoly firm always earns super normal profit
II. Sweezy's kinked demand curve model is the best known model explaining relatively more satisfactory behaviour of oligopoly firm for price rigidity
III. A perfectly competitive firm is price-taker
IV. Firms under monopolistic competition earn only normal profits
Choose the correct option from those below
In monopolistic competition of firm remains in equilibrium in the long run
In monopolistic competition, a firm is in long run equilibrium
The monopolistic firm will be in equilibrium, where