A firm operating in a monopolistic competition finds that its marginal revenue equals marginal cost when producing 12 units. The price determined from the demand curve is $42. Which category best describes the firm's behavior at this output level?

In monopolistic competition, firms aim to maximize their profits by producing where marginal revenue equals marginal cost. In this case, the firm produces 12 units because that is the point where these two values match, indicating it is making the best decision for profit at this output level. The price from the demand curve is $42, which is higher than the average cost of production at that level, suggesting the firm is earning a profit. Therefore, the firm's behavior can be described as profit-maximizing, as it is producing the quantity that maximizes its profits while still being able to charge a price above its costs. For example, if the average cost of producing 12 units is $30, the firm earns a profit of $12 per unit sold.