Suppose that a profit-maximizing monopoly firm experiences a substantial technological change that reduces its marginal and average total costs by $40.If the firm has been operating for over 10 years, it probably:
A) had negative economic profits.
B) had zero economic profits.
C) had positive economic profits.
D) was unable to estimate its own profits.

Question

Quizplus · Accepted Answer

If the monopoly firm had been operating for over 10 years and was still in business, it is likely that it was earning economic profits. The technological change that reduces its marginal and average total costs by $40 will increase its profits even further. Therefore, the firm was likely earning positive economic profits before the technological change.

Suppose That a Profit-Maximizing Monopoly Firm Experiences a Substantial Technological