If a monopolist's marginal costs shift up by $1.00,then
A)the monopoly price will rise by $1.
B)the monopoly price will rise by more than $1.
C)the monopoly price will rise by less than $1.
D)there is no change in the monopoly price and profits fall.

Question

Quizplus · Accepted Answer

In a monopoly, the price is set where marginal cost equals marginal revenue. If marginal costs increase by $1, the monopolist will adjust the price, but it will typically rise by less than $1 due to the downward-sloping demand curve and the monopolist's profit-maximizing behavior.

If a Monopolist's Marginal Costs Shift Up by $1