Which is the correct option? The monopoly firm may earn positive economic profits in the long run...

Question:

Which is the correct option?

The monopoly firm may earn positive economic profits in the long run because

a. it produces a homogeneous product.

b. it is the only firm that wishes to produce the product.

c. of high barriers to entry.

d. a and c

e. all of the above

Monopoly:

A monopolist is the sole producer for a market and hence faces the entire market demand curve. The monopolist maximizes price by producing until the marginal revenue from the last unit produced is the same as the marginal cost. The monopolist earns a positive profit by pricing above the marginal cost, and is able to sustain a positive profit in the long run.

Answer and Explanation:

The answer is c.

In the short run the monopolist can earn a positive profit by pricing its output above the marginal cost. Standard economic theory...

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Natural Monopoly in Economics: Definition & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 13
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