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Figure 9.5
-(Figure 9.5) What happens to the firm's profit-maximizing price and quantity following the increase in demand from D₁ to D₂?

Question

Use the following to answer question: Figure 9.5 -(Figure 9.5) What happens to the firm's profit-maximizing price and quantity following the increase in demand from D₁ to D₂?

Quizplus · Accepted Answer

When demand increases from D₁ to D₂, the firm will adjust the price to P₂ and increase output to less than Q₂. This is because the firm wants to take advantage of the higher demand but also wants to avoid saturating the market with too much supply, which could lead to lower prices and profits. Therefore, the best choice is B.

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