GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Long-run equilibrium, he will also be in short-run equilibrium
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Short-run equilibrium, he will also be in long-run equilibrium
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Long-run equilibrium, he mayor may not be in short-run equilibrium
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None of the above
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Detailed explanation-1: -In the short-run, a monopolist firm cannot vary all its factors of production as its cost curves are similar to a firm operating in perfect competition. Also, in the short-run, a monopolist might incur losses but will shut down only if the losses exceed its fixed costs.
Detailed explanation-2: -The diagram for a monopoly is generally considered to be the same in the short run as well as the long run. Profit maximisation occurs where MR=MC. Therefore the equilibrium is at Qm, Pm. ( point M) This diagram shows how a monopoly is able to make supernormal profits because the price (AR) is greater than AC.
Detailed explanation-3: -What are short-run and long-run equilibrium? Short-run equilibrium is when the aggregate amount of output is the same as the aggregate amount of demand. Long-run equilibrium is when prices adjust to changes in the market and the economy functions at its full potential.
Detailed explanation-4: -Monopolistic competition, in the long run, is dominated by zero-profit equilibrium, as any deviation from zero profit will cause firms to enter or exit the market. In some markets, there may be excess capacity as a by-product of a monopolistic competitive structure.