6. This question, like the one before, also has to do with the relationship between elasticity and revenue. In this case we know that elasticity is 0.5, meaning demand is inelastic, or %Q < %P

   In particular, %Q = -0.5 x %P. This means that the change in price will be greater in percentage terms (in fact twice as large) than the change in quantity. If the firm increases price, quantity demanded will fall by a smaller percentage amount, increasing revenue.

   The question asks what a monopolist can do to increase profit, not revenue (in this case it's the same thing). If the firm increases price, thus lowering output, its revenues rise. However, since output falls it has to produce less, causing costs to fall. Rising revenue + falling costs mean increased profit. Since the firm is a monopolist it need not be concerned with competitors; therefore, raising the price increases profits if demand is inelastic.

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