assume that a monopoly loses money in the short run but stays in business. in a graph show the monopolists output, price and the total loss. what will happen in the long run?
explain please
Answers
Answered by
2
Answer:
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.
Usually, supernormal profit attracts new firms to enter the market, but there are barriers to entry in monopoly, and this enables the monopoly to keep supernormal profits.
Attachments:
Similar questions