question archive Why would an increase in the demand curve benefit a monopolist?
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Why would an increase in the demand curve benefit a monopolist?
Marginal revenue is the same as the demand curve but with a slope twice as steep (assuming linear demand curve). This means the if the demand curve increases so does marginal revenue. Marginal cost remains the same.
Thus, the monopolist can choose to continue operating at its old quantity but marginal revenue would exceed marginal cost. Whenever marginal revenue exceeds marginal cost, a monopolist can increase profit by increasing production. Therefore, the monopolists profit would increase by an increase in demand.