Question

A monopolist Select one: a. can raise its price without losing any sales because it is the only supplier in the market. b. can earn a greater than normal rate of return in the long run.

Answer 1

The correct answer is option b.

Step-by-step explanation:

A monopolist is the only firm in its market. It is the price maker and faces a downward-sloping demand curve. There is a restriction on the entry of new firms. So the monopolist can earn more than normal profit in both short-run as well as long run. The other firms can not join the market because of barriers to entry. So unlike a perfectly competitive firm, the monopolist will continue to earn super normal profits in the long run as well.