Pure monopolists may obtain economic profits in the long run because:a. of advertising. b. of rising average fixed costs. c. marginal revenue is constant as sales increase. d. of barriers to entry.

Question

Business

Jesus Carr

4 January, 10:18

Pure monopolists may obtain economic profits in the long run because:a. of advertising. b. of rising average fixed costs. c. marginal revenue is constant as sales increase. d. of barriers to entry.

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Answers (1)

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Philip Ramsey · Answer 1

The correct answer is option d.

Explanation:

A pure monopoly is a type of market structure where there is only a single firm in the market which is producing a good with no close substitutes. Such a market also has high barriers to entry.

A pure monopolist can have economic profits in the long run because of barriers to entry.

In the short run, all types of market structures can have positive profits because the short run is too short for new firms to enter.

But in the long run, if there is no or relatively low barrier to entry, positive profit will attract other firms to join the market. This will reduce profits to zero.

But the firms cannot enter into a pure monopoly market, so the monopolist can earn positive economic profits in the long run.