Question

A monopoly firm can earn supernormal profit both in the short-run and long-run, because __________.

• A. New firms are entered into the industry
• B. The entry of new firms is restricted
• C. Of the concept of selling cost
• D. Of the use of economies of scale in production

Answer 1

Answer: (B)

The entry of new firms is restricted

The monopoly firm can earn super normal profit both in the long and short run. This is because there is no competition and with supernormal profits usually there is entry of new firms, however under the monopoly market structure there is barrier to entry of new firms and hence the monopoly firm enjoys super normal profits,