Why can a monopoly make an economic profit in the long run?
A) because there are close substitutes for the firm's product
B) because the firm is protected by barriers to entry
C) because the firm produces where MR=MC
D) because P MR
E) All of the above are reasons why a monopoly can make an economic profit in the long run.

Question

Why can a monopoly make an economic profit in the long run?
A) because there are close substitutes for the firm's product
B) because the firm is protected by barriers to entry
C) because the firm produces where MR=MC
D) because P > MR
E) All of the above are reasons why a monopoly can make an economic profit in the long run.

Quizplus · Accepted Answer

A monopoly can make an economic profit in the long run because of the presence of barriers to entry that prevent other firms from entering the market and competing away the profits. These barriers could be in the form of patents, economies of scale, control over essential resources, or government regulations. As a result, the monopolist can maintain market power and charge a price higher than the marginal cost. On the other hand, A and C are conditions for profit maximization, but do not guarantee a long-term profit. D is not always true, as some monopolies may set a price below the marginal revenue to increase their market share. Therefore, option B is the best answer.

Why Can a Monopoly Make an Economic Profit in the Long