In Response to a Cost-Reducing Technological Breakthrough in the Production

question 160

Multiple Choice

In response to a cost-reducing technological breakthrough in the production of its product, a profit-maximizing monopolist will normally

• A) increase price and decrease production.
• B) not change its level of output or price.
• C) decrease the price it charges for its product.
• D) increase its output and practice price discrimination.

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Definitions:

Variable Costs

Costs that change in proportion to the level of production or business activity.

Full Costs

This refers to the comprehensive total amount that includes all relevant costs of production, including direct, indirect, fixed, and variable costs.

Cost of Goods Sold

The historical cost of products sold as reported in the income statement.