A reduction in a monopolist's fixed costs would
A)decrease the profit-maximizing price and increase the profit-maximizing quantity produced.
B)increase the profit-maximizing price and decrease the profit-maximizing quantity produced.
C)not effect the profit-maximizing price or quantity.
D)possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand.

Question

Quizplus · Accepted Answer

A reduction in fixed costs does not affect the marginal cost or marginal revenue, which are the determinants of the profit-maximizing price and quantity for a monopolist. Therefore, the profit-maximizing price and quantity remain unchanged.

A Reduction in a Monopolist's Fixed Costs Would