In the long run, profit-maximizing monopolists facing a downward-sloping demand curve
A)may earn profits greater than their opportunity costs of capital.
B)do not produce every possible unit of output for which marginal utility is greater than or equal to marginal cost.
C)may or may not have lower costs than perfectly competitive firms in the same industry.
D)All of these responses are correct.

Question

Quizplus · Accepted Answer

A) Monopolists can earn profits greater than their opportunity costs of capital because they have the power to set prices higher than their marginal cost.
B) Monopolists do not produce every possible unit of output for which marginal utility is greater than or equal to marginal cost because they would have to lower prices to do so, which would reduce their profits.
C) Monopolists may or may not have lower costs than perfectly competitive firms in the same industry. This depends on the specific industry and the monopolist's ability to gain economies of scale or other cost advantages.

In the Long Run, Profit-Maximizing Monopolists Facing a Downward-Sloping Demand