Please refer problem 3 from the attached file for graph.
The accompanying graph (bottom of this page) summarizes the demand and costs for a firm that operates in a monopolistically competitive market.
a. What is firm's optimal output?
b. What is firm's optimal price?
c. What are the firm's maximum profits?
d. What adjustments should the manager be anticipating?
a.What is firm's optimal output?
A monopolistically competitive firm will choose the output level where MR=MC to maximize profits.
MR and MC curves intersect each other at point where Q=7. So, optimal output level is 7 units. ...
The solution describes the steps to determine optimal output, price and associated profits of a monopolostically competitive firm.