In the long run, profit-maximizing monopolists facing a downward-sloping demand curve
A)may earn profits greater than their opportunity costs of capital.
B)do not produce every possible unit of output for which marginal utility is greater than or equal to marginal cost.
C)may or may not have lower costs than perfectly competitive firms in the same industry.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A) Monopolists can earn profits greater than their opportunity costs of capital in the long run since they face a downward-sloping demand curve, which means they can set a price higher than their marginal cost, leading to higher profits.
B) Profit-maximizing monopolists do not produce every possible unit of output where marginal utility is greater than or equal to marginal cost because doing so would result in lower profits. They choose the level of output where marginal revenue equals marginal cost instead.
C) Monopolists may or may not have lower costs than perfectly competitive firms in the same industry. It depends on their production technology and efficiency levels relative to their competitors.

In the Long Run, Profit-Maximizing Monopolists Facing a Downward-Sloping Demand