A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared to the condition before the increase in marginal costs, the monopolist will _____ its price and _____ its level of production.
A) raise; decrease
B) not change; decrease
C) raise; increase
D) lower; increase

Question

Quizplus · Accepted Answer

When a monopolist's marginal cost curve shifts up, it will increase its price and decrease its level of production to maximize profit, as the higher marginal cost reduces the quantity where marginal cost equals marginal revenue.

A Monopolist's Marginal Cost Curve Shifts Up, but the Firm's