An increase in the fixed costs of a monopoly firm would _____ price and _____ quantity in the short run.
A)increase;decrease
B)increase;increase
C)not change;not change
D)decrease;decrease

Question

Quizplus · Accepted Answer

In the short run, an increase in fixed costs for a monopoly firm does not affect the price or quantity because the firm's pricing decisions are based on marginal costs, not fixed costs. Fixed costs are sunk in the short run and do not influence marginal cost or the firm's output and pricing decisions.

An Increase in the Fixed Costs of a Monopoly Firm