Answer to Question #77512 in Microeconomics for Felix

Question

Refer to the figure below. Suppose that the cost of cheese falls, so that the marginal cost of producing pizza decreases.



Will the MC curve shift up or down?



Will the optimal amount of pizza increase or decrease?

Answer 1

Refer to the figure below. Suppose that the cost of cheese falls, so that the marginal cost of producing pizza decreases.
The MC curve will shift down.
The optimal amount of pizza will increase.