Under Average-Cost Pricing, an Increase in the Monopolist's Production Cost

question 123

Multiple Choice

Under average-cost pricing, an increase in the monopolist's production cost will

• A) decrease its profit because its profit per unit decreases.
• B) not affect its profit because the government adjusts the regulated price equal to the average cost.
• C) increase its profit because the monopolist can reduce the average cost at a greater output level.
• D) none of the above

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Definitions:

Transparency

The quality of being open, communicative, and accountable, making actions, decisions, and processes easy to understand and scrutinize.

Independent Variable

A variable that is manipulated in an experiment to see if it causes a change in another variable.

Confounding Variable

A factor other than the independent variable that might produce an effect in an experimental design, thus confounding the results.

Manipulates

Influences or controls someone or something to one's advantage, often with deceit or skill.