Question

The degree of monopoly power is to be measured in terms of the firm's __________.

• A. normal profit
• B. supernormal profit
• C. both normal and supernormal profit
• D. selling price

Answer 1

Answer: (B)

supernormal profit

Supernormal profit is profit above the normal levels, earned when total revenue is higher than total costs. For monopoly to gain profits, MR=MC i.e. marginal revenue should be equal to marginal cost to gain higher profits. Hence the one getting higher profit will have a higher degree of monopoly power.