Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that:
A) marginal revenue will increase but marginal cost will decrease.
B) marginal revenue will not change but marginal cost will decrease.
C) neither average total cost nor marginal cost will change.
D) neither marginal revenue nor marginal cost will change.
E) both marginal revenue and marginal cost will decrease.

Question

Quizplus · Accepted Answer

Fixed costs do not affect marginal revenue or marginal cost because these are related to the costs and revenues of producing one more unit of a good or service, which are influenced by variable costs, not fixed costs.

Assume That a Firm Is Producing at Its Profit-Maximizing Level