Figure 95 What happens to the firms profitmaximizing price a

(Figure 9.5) What happens to the firm\'s profit-maximizing price and quantity following the increase in demand from D1 to D2?

The firm will reduce output from Q3 to Q2 and raise price from P2 to P3.

The firm will sell Q2 units of output at a price of P2.

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.

Solution

The firm will raise the price from P2 to less than P3 and increase output from Q1 to less than Q2.