A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result,the firm's price will _____,the firm's output will _____,and the firm's economic profit will _____.
A)increase;increase;increase
B)increase;increase;decrease
C)stay the same;stay the same;increase
D)decrease;stay the same;increase

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, a decrease in fixed costs does not affect the price or output in the short run because the firm's price and output decisions are based on marginal costs, not fixed costs. However, lower fixed costs directly increase the firm's economic profit by reducing total costs.

A Gas Station Operates in a Monopolistically Competitive Market and Is