Picture in your mind's eye the graph of a profit-maximizing monopolist. If its cost curves-both ATC and MC-shift upward while its demand curve remains unchanged, the monopolist will
A) decrease price and increase output
B) decrease both price and output
C) increase price and decrease output
D) increase both price and output
E) keep both price and output at the same level

Question

Quizplus · Accepted Answer

When a monopolist's ATC and MC curves shift upward (indicating higher costs) while demand remains unchanged, the monopolist will seek to maximize profit by producing where MR=MC at a higher cost level. This typically results in a decrease in output and an increase in price to cover the higher costs.

Picture in Your Mind's Eye the Graph of a Profit-Maximizing