Question

Describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach the long-run equilibrium?

In the short run, both monopolists and competitive firms ____#1______ earn positive economic profits. In the long run, ______#2_________ can earn a positive economic profit.

#1: CAN or CANNOT

#2:

A) competitive firms, but not monopolists

B) both monopolists and competitive firms

C) neither monopolists nor competitive firms

D) monopolists but not competitive firms

True or False: The adjustment to long-run equilibrium occurs more quickly for monopolists than for competitive industries.

Answer 1

• Can
• Neither Monopolist nor Competitive
• True

In short run, monopolist have some patent right of producing a product which gives them some positive profit in short run. In long run, these patent expires, or some other producer comes up in the market with an updated version of that product which lowers the profit in long run. Same is the case with Competitive Industry which have positive profits in short run due to less numbers of firms in the market. With profit rises in long run, more firms enters into the market due to No barrier to enter feature of this market which reduces the profit to zero.