Question

what happens to the firm's profit-maximizing price and quantity following the increase in demand from d1 to d2? group of answer choices the firm will increase the price to p3 and sell q1 units of output. the firm will raise the price from p2 to less than p3 and increase output from q1 to less than q2. the firm will sell q2 units of output at a price of p2. the firm will reduce output from q3 to q2 and raise the price from p2 to p3.

Answer 1

In response to the increase in demand, the firm will raise the price and increase the output but not to the point where marginal costs exceed marginal revenue.

• In response to the increase in demand from D1 to D2, the firm's profit-maximizing price and quantity will change.
• The firm will raise the price from P2 to less than P3 and increase the output from Q1 to less than Q2.
• This is because when there is an increase in demand, the firm can sell more units at a higher price, resulting in higher total revenue.
• To maximize profits, the firm will increase output but not to the point where marginal costs exceed marginal revenue.