A profit maximizing monopolist will change its price in response to all but which one of the following?
A)increase in its FC
B)an increase in a sales tax imposed on its product
C)a rightward shift in its demand curve
D)an upward shift in its variable cost curve

Question

Quizplus · Accepted Answer

Fixed costs (FC) do not affect the marginal cost of production, which is what a profit-maximizing monopolist considers when deciding on the quantity to produce and, consequently, the price. Changes in sales tax, demand, and variable costs all affect either the marginal cost or marginal revenue, and thus would influence the monopolist's pricing decisions.

A Profit Maximizing Monopolist Will Change Its Price in Response