A dairy farmer is a monopolist in the milk industry and is currently selling milk at the profit maximizing price. As a result of a terrible storm, the dairy farmer sees an increase in cost of feed for the cows. At the same time, the dairy farm receives an insurance check which effectively lowers the fixed costs of the farm. What effect will this cost change have on the optimal price of milk the farmer sets?

which answer of the below?

The change in costs does not impact the profit maximizing price and quantity sold for the dairy farmer.

The increase in variable costs will decrease the optimal price that should be set by the farmer.

The increase in variable costs will increase the optimal price that should be set by the farmer.

The impact on price cannot be determined due to some costs increasing, and other costs decreasing.