The diagram shows the cost and revenue curves of an oligopolist. In the initial situation, $A{C_1}$ is its average cost curve, $M{C_1}$ is its marginal cost curve and the firm is in equilibrium at output OQ and price OP.
The cost of labour rises, so that $A{C_2}$ and $M{C_2}$ become the relevant cost curves.
What should the firm do to maximise profit in this new situation?

leave both price and output unchanged
2 )
leave price unchanged and increase output
3 )
leave price unchanged and reduce output
4 )
raise price and leave output unchanged
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