Question

Describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run.  

Which should take longer to reach the long-run equilibrium? Fully explain your answers.

Answer 1

Economic profit in a monopolistic firm will be higher when compared to competitive firm. As the monopolistic there be only a single firm who captures the entire market without any competition , So the profits wiil be higher as they are the one who controlls the market. So in short run and long run they have profits

Where as in a competitive market there will be many firms which try to capture a single market. Thus no firm can earn profits until the long run as there will new entries from time to time. So in the short run there will be no profits but in the long run they may have very little amount of profits

So monopolist firm will reach the long run equllibrium in short period of time where as competitive firm will take a long period of time.