In monopolistic competition, a firm will always maximize profit by producing at the output level where marginal cost is greater than marginal revenue.

In monopolistic competition, a firm aims to maximize its profit by finding the right balance between its costs and revenues. Profit maximization occurs when a firm produces at the output level where marginal cost (the cost of producing one more unit) equals marginal revenue (the income from selling one more unit). If a firm produces where marginal cost is greater than marginal revenue, it means the cost of producing that extra unit is higher than the money it brings in, leading to a loss on that unit. For example, if a coffee shop sells an extra cup of coffee for $3 but it costs $4 to make, producing that cup would decrease the shop’s profit. Therefore, to maximize profit, the firm should produce only up to the point where marginal cost equals marginal revenue.