Question

A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared with the condition before the increase in marginal costs, the monopolist will _____ its price and _____ its level of production.

Answer 1

Answer:

(1)raise, (2)decrease

Step-by-step explanation:

A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared with the condition before the increase in marginal costs, the monopolist will raise its price and decrease its level of production.

Marginal cost is the additional cost incurred when one more unit of the output is produced. It is a J-shaped curve, which initially decreases, reaches its minimum and then starts increasing.

Marginal cost is an important factor in economic theory because a company that is looking to maximize its profits will produce up to the point where marginal cost (MC) equals marginal revenue