Question

In which market structures would we usually see economic profits at equilibrium?

a. only in monopoly

b. in monopoly and in monopolistic competition

c. in monopoly and strong or cooperating oligopolies

d. in monopoly and in differentiated oligopoly

e. in all market structures

Group of answer choices

Suppose a price taker market has been at equilibrium until an increase in demand increases the market price. In the future, ceteris paribus, we should expect to see
a. the price stay at the higher level
b. the price goes even higher
c. the price fall
d. costs increase
e. costs decline

Answer 1

1. Ans is C. In case of monopoly and cooperative oligopoly, firm can earn positive economic profit because of entry barrier.

2. Ans is C. In future in long run, price will fall. An increase in demand shift the demand curve to the right leading to an increase in equilibrium price. Firm will earn positive economic profit and due to free entry other firms will enter and supply curve shifts to the right leading to a decrease in price in future and new equilibrium price will be equal to the initial equilibrium price