Areduction in a monopolist's fixed costs would select one: a. not effect the profit-maximizing price or quantity. b. possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand. c. increase the profit-maximizing price and decrease the profit-maximizing quantity produced. d. decrease the profit-maximizing price and increase the profit-maximizing quantity produced.
The correct answer is option a.
The monopolist determines their equilibrium quantity and price through the intersection of marginal cost and marginal revenue.
A reduction in fixed costs will change the profits to the monopolist but it will not change the equilibrium price and quantity. This is because the change in fixed costs will not affect marginal revenue and marginal cost.
So even after a change in fixed costs, the optimal; output level remains the same.
is this a