If a Monopolist Incurs a Large Fixed Cost That Shifts

question 4

Multiple Choice

If a monopolist incurs a large fixed cost that shifts its average total cost curve upward,the effect on price and output will be

• A)price and output will both rise
• B)price will rise and output will fall
• C)the firm will lower its price so that elastic demand will raise revenues to cover the additional cost
• D)the firm will pass the higher cost on to customers without changing the amount consumers will buy
• E)there will be no effect on price or output

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Definitions:

Fixed Amount

A specific sum of money that does not change over time or with use, often referring to payments or charges.

Payable

Refers to an amount of money that is owed and should be paid, often within a specific period of time.

Clarity

The quality of being easily understood or free from ambiguity.

Order Instrument

A negotiable instrument that is payable “to the order of an identified person” or “to an identified person or order.”