The correct answer is: C. the MR curve intersects the SMC curve.
A monopolistic competitor is a firm that faces a downward-sloping demand curve but has a relatively large number of close substitutes. This means that the firm can raise its price without losing all of its customers, but it cannot raise its price too high or customers will switch to a competitor.
The short-run equilibrium level of output for a monopolistic competitor is given by the point where the marginal revenue (MR) curve intersects the short-run marginal cost (SMC) curve. At this point, the firm is maximizing its profits.
The MR curve is the firm’s marginal revenue curve. It shows how much revenue the firm will earn from selling an additional unit of output. The SMC curve is the firm’s marginal cost curve. It shows how much it costs the firm to produce an additional unit of output.
The MR curve intersects the SMC curve from below at the point where the firm is maximizing its profits. At this point, the firm is producing the quantity of output where the marginal revenue is equal to the marginal cost. This is the profit-maximizing level of output.
The other options are incorrect because they do not represent the profit-maximizing level of output for a monopolistic competitor.
Option A is incorrect because it states that the profit-maximizing level of output is given by the point where P = SMC. However, this is not the case. The profit-maximizing level of output is given by the point where MR = SMC.
Option B is incorrect because it states that the profit-maximizing level of output is given by the point where P = SAC. However, this is not the case. The profit-maximizing level of output is given by the point where MR = SMC.
Option D is incorrect because it states that the profit-maximizing level of output is given by the point where MR intersects the SMC curve from below and P = AVC. However, this is not the case. The profit-maximizing level of output is given by the point where MR = SMC.