Figure 8.13
-Consider an unregulated monopoly in Figure 8.13. Suppose that a second firm enters the market. As a result, if the demand curve facing each firm lies entirely below the long-run average cost curve

Question

Quizplus · Accepted Answer

When the demand curve facing each firm lies entirely below the long-run average cost curve, the market cannot support more than one firm making positive economic profits. Thus, in this case, neither firm makes a positive economic profit. This is because the entry of a second firm increases competition, driving down prices and reducing the market share of each firm, making it difficult for them to cover their costs and make a profit.

Figure 8.13 -Consider an Unregulated Monopoly in Figure 8.13. Suppose That a That