Question

A monopolist:

A. earns a profit in the short run and the long run.
B. earns a profit in the short run but not the long run.
C. can earn profits or incur losses in the short run.
D. can never incur losses.
Monopolists can earn profits or incur losses in the short run depending on the relationship between average total cost and price

Answer 1

The answer is C. can earn profits or incur losses in the short run.

Step-by-step explanation:

A monopolist maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue = marginal cost. However, if the average total cost is above the market price, then the firm will incur losses, equal to the average total cost minus the market price multiplied by the quantity produced