Suppose a 4 percent increase in price results in a 2 percent ...

[joe]

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
 
  A) 2; The product is elastic. B) 0.5; The product is inelastic.
  C) 0.2; The product is inelastic. D) 50; The product is inelastic.

Question 2

Why can a monopoly make a positive economic profit even in the long run?
 
  What will be an ideal response?

[jaymee143]

Answer to Question 1

B

Answer to Question 2

Barriers to entry prevent the monopoly firm from enduring the pressure of competition, and allow it to choose the quantity of output that is associated with the profit-maximizing market price. This allows a monopoly firm to potentially enjoy positive economic profit, even in the long run.