If the monopoly price is less than the average costs, the firm ______.

earns monopoly profits

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earns normal profits

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suffers losses

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earns no profit or loss

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Solution

The correct option is C suffers losses
As the monopoly firm is the price maker he will choose to set a price above its total cost. However, when the monopoly price is less than average cost, the monopoly firm tends to suffers losses.

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In the long run, firms under monopoly or oligopoly must only earn normal profits. State true or false.

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