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.

Question

Ivy Rodriguez

Business

22 July, 07:25

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.

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Answers (1)

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Janae Sampson · Answer 1

The correct answer is option b.

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.