A monopolist will be earning positive economic profits

Question

Quizplus · Accepted Answer

The monopolist will earn positive economic profits when the price it charges exceeds its average total cost (ATC). This is because in that case, the price covers all of the costs (including the opportunity cost of the resources used to produce the good), leaving a positive profit. If price is equal to marginal cost (MC), then the monopolist is earning zero economic profits, while if marginal revenue (MR) is positive, it means that the monopolist is selling additional units at a profit (i.e., MR > MC), but it does not necessarily mean that it is earning positive economic profits since total revenue may not cover all of the costs. Finally, the statement that a monopolist earns profits at all times since it controls the market is not accurate as the level of profits will depend on the price and cost conditions, and the extent of market power.

A Monopolist Will Be Earning Positive Economic Profits