Monopoly profit

Question

Monopoly profit

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Monopoly profit is the difference between the price charged and the average total cost (ATC) multiplied by the quantity sold. This formula is also known as the markup rule. In perfect competition, price equals marginal cost (P=MC), but a monopolist charges a higher price and restricts output in order to maximize profits. Monopoly profit exists in the long run because entry barriers prevent new firms from entering the market and competing away economic profits. Without barriers to entry, other firms would be attracted to the same market, driving the price down to the competitive level.

Monopoly Profit