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From course:

Economics A Level (DONEEEEEEE)

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Question:

How can Monopolist Firms make Supernormal profits in the Long Run?

Author: eric_galvao



Answer:

-Since the Firm is aiming to Max Profits, MC=MR will be the level of Output -The Demand Curve will produce a Price relating to the Output from MC=MR. -The AC Curve will produce a AC cost, which is below that of the Price the Firm is Charging. So there is large Profits being made -Since it’s a Monopoly, Barriers to Entry are Impossible so new Firm can enter the Market. That means the Firm will always Retain that Profit (Unless Trade Unions intervene..)


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