As manager of a mutual fund, your job is to buy stocks in companies whose stock price will rise. You decide to only buy stocks of monopoly companies rather than perfectly competitive companies. Your rationale: the monopoly company stocks are a "sure-thing" since customers have no alternative suppliers, which means monopolies earn much more profit than perfectly competitive firms (which you expect to result in higher stock prices for the monopoly companies). What is wrong with assuming that monopolies must be profitable? Explain, using a diagram to illustrate your explanation.

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The Answer of As manager of a mutual fund, your job is to buy stocks in companies whose stock price will rise. You decide to only buy stocks of monopoly companies rather than perfectly competitive companies. Your rationale: the monopoly company stocks are a "sure-thing" since customers have no alternative suppliers, which means monopolies earn much more profit than perfectly competitive firms (which you expect to result in higher stock prices for the monopoly companies). What is wrong with assuming that monopolies must be profitable? Explain, using a diagram to illustrate your explanation.

As Manager of a Mutual Fund, Your Job Is to Buy