The distinction between the short‐run and the long‐run is not as important in the case of
a monopolistic market structure. 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.
This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test. Can a monopoly make economic profits in the long run?Companies in a monopolistic competition make economic profits in the short run, but in the long run, they make zero economic profit.
What happens to monopoly in the long run?In the long-run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.
Is economic profit positive in the long run?In the long run, economic profit must be zero, which is also known as normal profit. Economic profit is zero in the long run because of the entry of new firms, which drives down the market price. For an uncompetitive market, economic profit can be positive.
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