Figure 15-4

Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is likely to happen to this monopoly in the long run if costs and demand stay the same?
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 15-4
  
Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is likely to happen to this monopoly in the long run if costs and demand stay the same?
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

Due to the presence of entry barriers, there will be no new firms entering the market to eliminate its profits. Therefore, as long as costs and demand stay the same, this firm will continue to enjoy economic profits as a monopoly.

Figure 15-4 Figure 15-4 Shows the Demand and Cost Curves for a and Cost