Figure 10-4

Figure 10-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 10-4.What is likely to happen to this monopoly in the long run?
A)New firms will enter the market to eliminate its profits.
B)It will expand its output to take advantage of economies of scale so as to further increase its profit.
C)As long as there are entry barriers, this firm will continue to enjoy economic profits.
D)It will be regulated by the government because of its excess profits.

Question

Figure 10-4
  
Figure 10-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 10-4.What is likely to happen to this monopoly in the long run?
A)New firms will enter the market to eliminate its profits. 
B)It will expand its output to take advantage of economies of scale so as to further increase its profit. 
C)As long as there are entry barriers, this firm will continue to enjoy economic profits. 
D)It will be regulated by the government because of its excess profits.

Quizplus · Accepted Answer

In the long run, as long as there are entry barriers, a monopoly can continue to earn economic profits because new firms cannot enter the market to compete away those profits.

Figure 10-4 Figure 10-4 Shows the Demand and Cost Curves for a and Cost