Assume that a monopoly is producing at a profit-maximizing output level. If the firm's total fixed costs decrease, the firm
A) should lower its price.
B) should increase its price.
C) should continue to produce at the same level.
D) increase its output level.

Question

Quizplus · Accepted Answer

A decrease in total fixed costs does not affect the marginal cost of production, which is the primary determinant of the profit-maximizing output level for a monopoly. Therefore, the firm should continue to produce at the same level.

Assume That a Monopoly Is Producing at a Profit-Maximizing Output