When marginal costs decrease,a monopolist will usually lower its price and increase its level of output.

Question

Quizplus · Accepted Answer

When marginal costs decrease, the monopolist can produce additional units of output at a lower cost. This provides an opportunity for the monopolist to increase their profit by producing and selling more units at a lower price. Therefore, a rational monopolist will usually lower its price and increase its level of output when marginal costs decrease.

When Marginal Costs Decrease,a Monopolist Will Usually Lower Its Price