I would like an explanation about this exercise and an explanation about why other options are wrong

Assume that Sandy Chip Products, Inc. is the world's only producer of a special kind of computer chip. Its patents assure that it will continue to be the only producer for at least the next decade. Chip production requires clean water. The rm gets its water from a river, which is being polluted by paper mills located upstream. Sandy Chip therefore has to process the water before using it. A recently enacted pollution-control program. whereby the paper mills will be ned for polluting the river, will result in less pollution and thus lower Sandy Chip's costs. Sandy Chip expects its marginal and average cost to fall by $20 per chip. With the reduction in its costs, Sandy Chip will probably: Select one: a. lower its price by $20. b. lower its price. but by less than $20. c. lower its price. but by more than $20. ' - d. It is not possible to make a determination from the information given. x