A monopoly is able to continue to generate economic profits in the long run because
A) It can control both price and output in the market.
B) potential competitors sometimes don't notice the profits.
C) the monopolist is financially powerful.
D) Antitrust or competition laws eliminate competitors for a specified number of years.
E) there is some barrier to entry to that market.

Question

Quizplus · Accepted Answer

A monopoly is able to earn economic profits in the long run because it faces barriers to entry, which prevent competitors from entering the market and eroding its market power. These barriers can be due to control of inputs or distribution channels, network effects, economies of scale, or legal restrictions. As a result, the monopolist can maintain a higher price and output than would be possible under perfect competition, and capture a portion of the consumer surplus as profit. While other factors such as financial power or legal protection may contribute to a monopolist's sustained profitability, the main reason is the presence of barriers to entry.

A Monopoly Is Able to Continue to Generate Economic Profits