An increase in the marginal costs of a monopoly would _______ price and _______ quantity.
A) not change; not change
B) increase; decrease
C) increase; increase
D) decrease; increase

Question

Quizplus · Accepted Answer

An increase in marginal costs would lead to higher costs for the monopoly, which in turn would need to increase the price of the product to maintain their profit levels. This increase in price would then lead to a decrease in quantity demanded as consumers may choose to purchase a substitute product or reduce their overall consumption. Thus, the correct answer is B - increase in price and a decrease in quantity.

An Increase in the Marginal Costs of a Monopoly Would