If marginal costs decrease and the MC curve shifts down, a typical monopolist will
A)reduce price and reduce quantity of output.
B)reduce price and increase quantity of output.
C)increase price and reduce quantity of output.
D)increase price and increase quantity of output.

Question

Quizplus · Accepted Answer

When marginal costs decrease and the MC curve shifts down, a monopolist will reduce price to sell more units, thus increasing the quantity of output. This is because the lower marginal cost means it's cheaper for the monopolist to produce each additional unit, encouraging them to expand production and lower prices to increase sales.

If Marginal Costs Decrease and the MC Curve Shifts Down