Assume that a firm is producing at its profit-maximizing level of output. A decr
ID: 1123129 • Letter: A
Question
Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that:
A) marginal revenue will increase but marginal cost will decrease.
B) marginal revenue will not change but marginal cost will decrease.
C) neither average total cost nor marginal cost will change.
D) neither marginal revenue nor marginal cost will change.
E) both marginal revenue and marginal cost will decrease.
A) marginal revenue will increase but marginal cost will decrease.
B) marginal revenue will not change but marginal cost will decrease.
C) neither average total cost nor marginal cost will change.
D) neither marginal revenue nor marginal cost will change.
E) both marginal revenue and marginal cost will decrease.
Explanation / Answer
Answer
D) neither marginal revenue nor marginal cost will change.
the profit is maximum at MR=MC and the MC is the cost of an extra unit where fixed cost does not change the profit-maximizing output.
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