Suppose a restaurant has a monopoly in a certain small town.Its rent,which is one of the several fixed costs it incurs whether it sells food or not,has gone up.In the short run,the restaurant should _____
A)pay the higher rent and increase menu prices.
B)pay the higher rent and leave menu prices unchanged.
C)pay the higher rent and lower menu prices.
D)open another restaurant in the same town.
E)shut down.

Question

Quizplus · Accepted Answer

In the short run, the restaurant should pay the higher rent and leave menu prices unchanged because fixed costs, like rent, do not affect the marginal cost of producing additional units of output. Therefore, an increase in rent does not directly impact the optimal price or output level in the short run, assuming demand remains constant.

Suppose a Restaurant Has a Monopoly in a Certain Small