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

question 285

Multiple Choice

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.

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Definitions:

European Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified asset at a predetermined price before or at a specified expiration date, exercisable only at the expiration.

Expiration Date

Refers to the date on which a derivative contract (such as options or futures) ceases to exist and its right to execute is no longer valid.

Exercise Price

The exercise price is the price at which an option holder can buy (call option) or sell (put option) an underlying asset or security.

Call Option

An agreement in finance that allows the owner the option, but not the requirement, to purchase a stock, bond, commodity, or different asset at a determined price during a defined timeframe.