An increase in fixed costs for a monopoly will do which of the following?Group of answer choicesDecrease the monopolist's economic profitsLead to a slight reduction in the number of units soldLower marginal revenueCause the monoplist to increase its price
Question
An increase in fixed costs for a monopoly will do which of the following?Group of answer choicesDecrease the monopolist's economic profitsLead to a slight reduction in the number of units soldLower marginal revenueCause the monoplist to increase its price
Solution
An increase in fixed costs for a monopoly will "Decrease the monopolist's economic profits". Fixed costs are costs that do not change with the level of output. They are incurred even if the firm is not producing anything. If fixed costs increase, it means the firm has to cover higher costs, which will reduce its profits, assuming all other factors remain constant. It's important to note that changes in fixed costs do not affect the output decision of the firm in the short run, so it won't lead to a reduction in the number of units sold or cause the monopolist to increase its price.
Similar Questions
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