Figure 9.4 Figure 9.4 shows the demand and cost curves for a monopolist.
-Refer to Figure 9.4.What is likely to happen to this monopoly in the long run?
A)New firms will enter the market to eliminate its profits.
B)It will expand its output to take advantage of economies of scale so as to further increase its profit.
C)As long as there are entry barriers, this firm will continue to enjoy economic profits.
D)It will be regulated by the government because of its excess profits.

Question

Figure 9.4  Figure 9.4 shows the demand and cost curves for a monopolist.
-Refer to Figure 9.4.What is likely to happen to this monopoly in the long run?
A)New firms will enter the market to eliminate its profits. 
B)It will expand its output to take advantage of economies of scale so as to further increase its profit. 
C)As long as there are entry barriers, this firm will continue to enjoy economic profits. 
D)It will be regulated by the government because of its excess profits.

Quizplus · Accepted Answer

As long as there are entry barriers, the firm will continue to enjoy economic profits. This is because potential competitors are deterred from entering the market due to these barriers. The monopolist can continue to earn profits in the long run unless these entry barriers are eliminated or reduced.

Figure 94 Figure 9