GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A monopoly producer usually earns
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Only normal profits
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Abnormal profits
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Neither profits nor losses
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Profits and losses which are uncertain
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Explanation:
Detailed explanation-1: -A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase. This means in the long run, a monopolistically-competitive company will make zero economic profit.
Detailed explanation-2: -The existence of high barriers to entry prevents firms from entering the market even in the long‐run. Therefore, it is possible for the monopolist to avoid competition and continue making positive economic profits in the long‐run.
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