Which of the following statements is true?
A)Both a monopolist and a perfectly competitive firm earn zero economic profits in the long run.
B)A monopolist earns zero economic profits, while a perfectly competitive firm earns positive economic profits in the long run.
C)Both a monopolist and a perfectly competitive firm earn zero economic profits in the short run.
D)Both a monopolist and a perfectly competitive firm earn positive economic profits in the long run.
E)A monopolist earns positive economic profits, while a perfectly competitive firm earns zero economic profits in the long run.

Question

Quizplus · Accepted Answer

In the long run, a monopolist can earn positive economic profits due to barriers to entry that protect its market power. In contrast, perfectly competitive firms earn zero economic profits in the long run because free entry and exit in the market drive profits to zero.

Which of the Following Statements Is True