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 output will:
A) rise.
B) fall.
C) remain unchanged.
D) It is not possible to make a determination from the information given.

Question

Quizplus · Accepted Answer

With the reduction in marginal and average total costs, the monopoly firm will have an incentive to increase its output in order to maximize its profits. By lowering its price, it will be able to increase its market demand and sell more units at a lower cost, resulting in a higher total output. Therefore, we can predict that the total output of the firm will rise.

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