If price increases by 10 percent and a firm is maximizing profits, output will
A) increase by 10 percent
B) decrease by 10 percent
C) remain unchanged
D) increase, but we don't know by how much
E) decrease, but we don't know by how much

Question

Quizplus · Accepted Answer

When a firm is maximizing profits and the price of its product increases, the firm will typically produce more to take advantage of the higher price. However, the exact percentage increase in output depends on the price elasticity of supply, which can vary widely among different types of products and industries. Therefore, while output will increase, the precise amount cannot be determined without additional information.

If Price Increases by 10 Percent and a Firm Is