Question

A monopolist will:

A. Never produce at an output level where marginal revenue is positive

B. Never produce at an output level where marginal revenue is constant

C. Never produce at an output level where marginal revenue is negative

D. Never produce at an output level where marginal cost is positive

E. Ignore marginal revenue as long as average revenue is positive.

In the long run:

A. Monopolies never earn econimic profit

B. Econimoc proifts and losses determine entry and exit into monopoly markets

C. Monoplies may earn economic profit

D. Compeition always destroys monopoly

E. Goverment always regulates monopoly

Answer 1

Answer 1. Option C is correct

Monopolists never produce output at a point where MR is negative.

A monopolist keeps it production increasing until the point his revenue from the additional output is more than his marginal cost. He will stop producing as he will start generating losses if he continues production at an increasing marginal cost.

Answer 2. Option C is correct

The monopolist may earn economic profit in the long run. It is possible for him to avoid competition and continue making economic profits in the long run because of its dominant market power.