Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5
-Refer to Figure 10-5.Suppose this firm experiences an increase in the demand for its product.In the short run,this profit-maximizing monopolist will

Question

Suppose a monopolist faces the demand curve and cost curves shown below.  FIGURE 10-5
-Refer to Figure 10-5.Suppose this firm experiences an increase in the demand for its product.In the short run,this profit-maximizing monopolist will

Quizplus · Accepted Answer

When faced with an increase in demand, the monopolist will seek to maximize profit by increasing both price and output, as long as the marginal revenue from selling additional units is greater than the marginal cost of producing them. In this case, the new profit-maximizing price and output level will be higher than the previous ones, as shown by the shift in the MR and MC curves to the right. Therefore, choice A is the best answer.

Suppose a Monopolist Faces the Demand Curve and Cost Curves