If a profit-maximizing monopolist is currently charging a price on the inelastic portion of its demand curve, what action should it take to maximize profits?
A) It should reduce both output and price.
B) It should raise the price and decrease output.
C) It should raise the price and hold output constant.
D) It should lower the price and increase output.

Question

Quizplus · Accepted Answer

When a monopolist is operating on the inelastic portion of its demand curve, raising the price and decreasing output can increase total revenue and potentially maximize profits, because the percentage decrease in quantity demanded is less than the percentage increase in price, leading to higher revenue.

If a Profit-Maximizing Monopolist Is Currently Charging a Price on the Inelastic