If a monopolist incurs a large fixed cost that shifts its average total cost curve upward,the effect on price and output will be
A)price and output will both rise
B)price will rise and output will fall
C)the firm will lower its price so that elastic demand will raise revenues to cover the additional cost
D)the firm will pass the higher cost on to customers without changing the amount consumers will buy
E)there will be no effect on price or output

Question

Quizplus · Accepted Answer

A monopolist sets price and output based on marginal cost and marginal revenue, not average total cost. A change in fixed costs does not affect marginal cost, so price and output remain unchanged.

If a Monopolist Incurs a Large Fixed Cost That Shifts