Question

g In a very long run situation, monopolies earn: a. an economic profit of 1%. b. an economic profit of 100%. c. an economic profit of 0. d. an economic loss of 1%.

Answer 1

Answer:

 b. an economic profit of 100%.

Explanation:

A monopoly is when there is only one firm operating in the industry. There are high barriers to entry of firms in a monopoly. Profit is maximised where MR = MC.

Economic profit is affected by the entry or exit of firms into the industry in the long run. Due to the high barriers to entry, a monopoly earns economic profit in the long run.

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