Suppose that a profit-maximizing monopoly firm undergoes 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

The reduction in costs will allow the monopoly firm to produce the same quantity of output at a lower cost. This gives the firm the ability to reduce its price while still earning a profit or maintain its price and increase profits. In either case, the lower cost will encourage the firm to increase its output, resulting in a rise in total output.

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