In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will
A) lower price to expand revenue possibilities.
B) reduce output and raise price.
C) maintain the current price if profit is still positive.
D) increase plant size to lower marginal cost.
E) decrease plant size to lower marginal cost.

Question

Quizplus · Accepted Answer

In the short run, if a monopolist's marginal cost increases, it will reduce output to where the new marginal cost equals marginal revenue, leading to a higher price to maintain profit maximization.

In the Short Run, How Will a Profit-Maximizing Monopolist React