Suppose that a monopoly is earning economic profits in the short run.As a result,

Question

Quizplus · Accepted Answer

The presence of barriers to entry prevents new firms from entering the industry, thus enabling the monopolist to continue earning economic profits in the short run. Therefore, the monopolist does not have to increase its price or lower its output, and there is no reason for the market supply curve or demand curve to shift. The profits will only fall in the long run if barriers to entry are eliminated and new firms enter the market.

Suppose That a Monopoly Is Earning Economic Profits in the Short