Fast Ink wants to prevent Jet Ink from entering the ink market. If Fast Ink expands its capacity, the expansion can lead to all of the following except which one?
A)decrease Fast Ink's profit- maximizing price
B)decrease Fast Ink's marginal cost
C)increase Fast Ink's profit- maximizing quantity
D)decrease Fast Ink's profit- maximizing quantity

Question

Quizplus · Accepted Answer

If Fast Ink expands its capacity, it is more likely to increase its profit-maximizing quantity rather than decreasing it. However, expanding capacity may lead to an increase in fixed costs, which would shift the average total cost curve upwards and increase Fast Ink's profit-maximizing price, reducing the quantity demanded. This could potentially decrease Fast Ink's profit-maximizing quantity, but it is not a guaranteed outcome. Expanding capacity would not directly decrease Fast Ink's marginal cost, but it may lead to economies of scale that would eventually lower marginal cost.

Fast Ink Wants to Prevent Jet Ink from Entering the Ink