When the demand curve is vertical and the supply curve is upward sloping,:

Question

Quizplus · Accepted Answer

With a vertical demand curve, the output price is fixed regardless of the quantity produced. If the supply curve is upward sloping, a decrease in input price will lower marginal cost, resulting in the firm being able to produce more quantity. However, since the output price is fixed, the firm will have to lower the output price by the same amount ($1) to sell the additional quantity produced. This will result in a decrease in the firm's profit. Therefore, option C is the correct answer.

When the Demand Curve Is Vertical and the Supply Curve