State whether the following statement is true or false, giving reasons: In momopolistic competition, Price > MC.
Dear Student,
In monopolistic firms, firms can make abnormal profits ( profits over normal profits ).
Profit maximisation level in monopoly case is determined by MR=MC but the monopolist cannot charge price = MC. since the demand curve lies above MC curve . Since monopolistic can earn higher profits by charging higher price why would he charge less ?
Regards
In monopolistic firms, firms can make abnormal profits ( profits over normal profits ).
Profit maximisation level in monopoly case is determined by MR=MC but the monopolist cannot charge price = MC. since the demand curve lies above MC curve . Since monopolistic can earn higher profits by charging higher price why would he charge less ?
Regards