What kind of profit can a monopoly make in the short run? In the ...

[mynx]

What kind of profit can a monopoly make in the short run? In the long run? Explain your answers.
 
  What will be an ideal response?

Question 2

The above figure shows the U.S. market for wheat. With international trade, the gain in total surplus is equal to ________.
 
  A) area A
  B) area B + area C
  C) area D
  D) area C + area F
  E) area C + area D + area F

[mirabriestensky]

Answer to Question 1

In the short run, a monopoly can make an economic profit, zero economic profit, or incur an economic loss. In other words, any sort of profit outcome is possible in the short run. In the long run, a monopoly can make an economic profit or zero economic profit. A monopoly will not incur an economic loss in the long run because it would shut down. The key result that differentiates it from firms in other types of markets is that a monopoly can make an economic profit in the long run. It can do so because there are barriers to entry. These barriers prevent other firms from entering the market and usurping part of the economic profit.

Answer to Question 2

C

[mynx]

YES! Correct, THANKS for helping me on my review

[Liddy]

Gracias!