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) charges a price equal to MC.

Question

Quizplus · Accepted Answer

In the long run, the monopolist will continue to operate at a price above average total costs, leading to economic profits. This is different from the perfectly competitive firm, which earns zero economic profits in the long run as a result of market forces driving prices to equal the minimum of average total costs. The monopolist can maintain its price above average total costs by preventing new firms from entering the market through barriers to entry, such as patents or resource ownership.

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