Monopoly power results from the ability to:

Question

Quizplus · Accepted Answer

Monopoly power results from the ability to set price above marginal cost, allowing the firm to earn profits in the long run. If a firm sets price equal to marginal cost, it will break even in the long run and not have any monopoly power. Equating marginal cost to marginal revenue may result in some monopoly power, but it will not be as strong as setting price above marginal cost. Setting price above average variable cost would result in losses in the long run and not result in monopoly power.

Monopoly Power Results from the Ability To