Suppose that a profit-maximizing monopoly firm undergoes a substantial technological change that reduces its marginal and average total costs by $40.If in response to its reduction in cost the firm changes its price in a profit-maximizing way,then we can predict that its total economic profit will:
A)fall.
B)remain unchanged.
C)rise.
D)It is not possible to make a determination from the information given.

Question

Quizplus · Accepted Answer

With the reduction in costs, the monopoly firm will have an increase in its profit-maximizing quantity. This will cause the price to decrease but the increase in quantity sold will make up for it. Therefore, total economic profit will rise.

Suppose That a Profit-Maximizing Monopoly Firm Undergoes a Substantial Technological