Question

Why doesn't the abnormal profit of a monopolist, unlike that of the perfect competitor, reduce to...

Why doesn't the abnormal profit of a monopolist, unlike that of the perfect competitor, reduce to zero in the long run?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The main reason why the perfectly competitive industry profit decreases overtime is free entry and exit of the firm in the market. Under a perfect market condition if the firm is earning a supernormal profit it will attract more and more other firms in the market. This will increase the output and decrease the price reducing the profit.

But, in a monopoly, there are barriers to entry and no firm can enter the market. This ensures the monopoly firm maintains a profit even in the long-run.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
One difference between monopoly and perfect competition is that: a monopolist seeks to maximize profit; a...
One difference between monopoly and perfect competition is that: a monopolist seeks to maximize profit; a perfect competitor does not. a perfect competitor seeks to maximize profit; a monopolist does not. the marginal revenue curve for a perfect competitor is downward sloping; for a monopolist, it is horizontal. the marginal revenue curve for a monopolist is downward sloping; for a perfect competitor; it is horizontal.
Explain why a monopolist maximizes its long-run profit by producing that output for which marginal revenue...
Explain why a monopolist maximizes its long-run profit by producing that output for which marginal revenue equals long-run marginal cost. What sense does this monopolist pricing differ to perfect competitive market? (
Why is long-run profit for the monopolistically competitive firm always zero while that of the monopolist...
Why is long-run profit for the monopolistically competitive firm always zero while that of the monopolist usually positive?
True or false? Monopolists differ from perfect competitors because monopolists make a profit. Why? a/ False....
True or false? Monopolists differ from perfect competitors because monopolists make a profit. Why? a/ False. Monopolists earn economic profits in the short run and perfect competitors earn losses in the short run. The distinguishing feature is that a monopolist restricts output to increase price, whereas a perfectly competitive firm cannot influence the price. b/ False. Monopolists, like perfect competitors, may or may not earn economic profits in the short run. The distinguishing factor is that perfect competitors produce where...
For a perfect competitor in the long run who experiences the following cost conditions, answer the...
For a perfect competitor in the long run who experiences the following cost conditions, answer the following questions. Assume the price is 28 (P=28). MC = 4 + 24Q AVC = 4 + 12Q Identify the condition for profit maximization and find the profit-maximizing quantity level (Q). Identify the long run (LR) profit condition and find the firm’s fixed costs (FC).
Explain why abnormal profits earned and losses incurred by perfectly competitive, profit-maximizing firms cannot be present...
Explain why abnormal profits earned and losses incurred by perfectly competitive, profit-maximizing firms cannot be present at long-run equilibrium.
a.Excess/abnormal profits play an important role in perfect competition. Explain. b. Why might average total costs...
a.Excess/abnormal profits play an important role in perfect competition. Explain. b. Why might average total costs initially decrease in the short-run? c. Should qualified accountants wash their own cars?
1. Why can't perfect competitors make an above-normal profit in the long-run? 2. In your own...
1. Why can't perfect competitors make an above-normal profit in the long-run? 2. In your own words, explain the outcomes of a perfectly competitive system in the long-run. 3. Why don't we have a perfectly competitive system?
In the long run, perfect competitive firms Select one: A. achieve a loss B. achieve profit...
In the long run, perfect competitive firms Select one: A. achieve a loss B. achieve profit C. achieve zero profit D. shutdown
Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why
Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT