Which of the following is true of monopoly but not true of perfect competition?
A) Firms can potentially earn economic profits in the short run.
B) Total revenue is the product of price times the quantity sold.
C) Firms can potentially earn economic profits in the long run.
D) A profit-maximizing firm will shut down if price falls below the average variable cost.

Question

Quizplus · Accepted Answer

In a monopoly, firms can earn economic profits in the long run due to barriers to entry, whereas in perfect competition, firms can only earn normal profits in the long run as new firms enter the market and drive economic profits to zero.

Which of the Following Is True of Monopoly but Not