When demand falls, the price charged by a monopoly under an average-cost pricing policy will fall.

Question

Quizplus · Accepted Answer

A monopoly under an average-cost pricing policy will not lower its price when demand falls because it sets its price based on its average costs, which do not change with changes in demand. The monopoly may decide to reduce its production level to match the lower demand, but it will not lower its price.

When Demand Falls, the Price Charged by a Monopoly Under