In response to an increase in the demand for a commodity,a monopoly firm that is producing at the profit-maximizing level of output will typically:
A)decrease price and output.
B)decrease output and increase price.
C)increase price but maintain the level of output.
D)increase output but maintain the same price.

Question

Quizplus · Accepted Answer

A monopoly firm that is producing at the profit-maximizing level of output will typically increase price but maintain the level of output in response to an increase in the demand for a commodity. This is because the firm can increase its profits by charging a higher price for the same level of output.

In Response to an Increase in the Demand for a Commodity,a