Suppose that a profit-maximizing monopoly firm experiences a substantial technological change that reduces its marginal and average total costs by $40.If in response to its reduction in cost, the firm changes its price in a profit-maximizing way, then we can predict that its total economic profit will:
A) fall.
B) remain unchanged.
C) rise.
D) It is not possible to make a determination from the information given.

Question

Quizplus · Accepted Answer

With the reduction in costs, the monopolist will experience an increase in its profits as it now has more room to increase output and/or lower prices. Thus, the monopolist will raise its output and possibly lower its price to capture more market share, leading to higher economic profits.

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