You are an economist working for the monopolistically competitive firm whose marginal cost curve, demand curve, and associated marginal revenue curve are depicted in Fig. 11.1. Suppose that the firm is currently charging a price of $7.50 per unit of output. What would you recommend to the firm in order to increase its profits?
- Not enough information to solve.
- Lower the price to sell more units.
- Raise the price, but sell fewer units.
- Raise the price of output, but also raise your cost of production.