Question

Kalteen sells 100 weight gain bars for $5 each. If Kalteen's average total cost of producing each bar is $3, what is Kalteen's profit?

If Kalteen from the above question sells its output in a monopoly market structure, what will happen in the long run?
A. firms will enter the market, D and MR will decrease, and profit = zero
B. firms will enter the market, D and MR will increase, and profit = zero
C. profit will not change in the LR due to high barriers to entry
D. firms will exit the market, D and MR will decrease, and profit = zero
E. firms will exit the market, D and MR will increase, and profit = zero

Answer 1

Kalteen's profit from selling the weight gain bars is $200. In the long run, within a monopoly market structure, Kalteen's profit would not change due to high barriers to entry, meaning answer choice C is correct.

Step-by-step explanation:

If Kalteen sells 100 weight gain bars for $5 each, and the average total cost of producing each bar is $3, then the profit can be calculated as follows:

• Total Revenue (TR) = Price x Quantity Sold = $5 x 100 = $500
• Total Cost (TC) = Average Total Cost x Quantity Sold = $3 x 100 = $300
• Profit = TR - TC = $500 - $300 = $200

In a monopoly market structure, in the long run:

1. Firms will not enter the market due to high barriers to entry.
2. Demand (D) and Marginal Revenue (MR) will not decrease as with competitive markets.
3. Profit will not change in the long run due to these high barriers to entry.

Therefore, the correct answer is C. profit will not change in the long run due to high barriers to entry.