If a monopoly firm is continually earning above-normal profits,then
A)the entry of new firms will reduce profits to normal in the long run
B)the profits may remain above-normal in the long run despite the entry of new firms
C)market forces other than the entry of new firms will reduce profits to normal in the long run
D)falling market demand due to the firm's high prices will reduce profits to normal in the long run
E)barriers to entry may enable the profits to remain above-normal in the long run

Question

Quizplus · Accepted Answer

If a monopoly firm has barriers to entry, it may prevent new firms from entering the market and competing away its above-normal profits. This can allow the firm to maintain its high profits in the long run, even if market forces do not reduce profits to normal levels. Therefore, option E is the best choice.

If a Monopoly Firm Is Continually Earning Above-Normal Profits,then