Because of a decrease in labour costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly _______ its price and _______ its quantity.
A) lowers; decreases
B) raises; increases
C) lowers; increases
D) raises; decreases

Question

Quizplus · Accepted Answer

When a monopoly experiences a decrease in marginal cost and average total cost, it will lower its price to sell more units, thus increasing its quantity sold. This is because the lower costs allow the monopoly to profitably offer its goods at a lower price, stimulating demand.

Because of a Decrease in Labour Costs, a Monopoly Finds