The monopolist's outcome in the long run differs from that of the perfectly competitive firm in that it:
A)has zero profits in the long run.
B)charges a price above average total costs.
C)charges a price where marginal costs equal average revenue.
D)None of these statements is true.

Question

Quizplus · Accepted Answer

In the long run, a perfectly competitive firm earns zero profits and produces at the minimum point of the average total cost curve. On the other hand, a monopolist can earn positive economic profits in the long run by producing at a point where marginal revenue equals marginal cost and charging a price above the average total cost. Hence, the monopolist charges a price above average total costs.

The Monopolist's Outcome in the Long Run Differs from That