If a Single-Price Monopoly Is Making a Large Economic Profit

question 9

Multiple Choice

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

• A) The monopoly must be keeping the amount earned secret.
• B) The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit.
• C) There are barriers to entry.
• D) The market must be too small.
• E) Nothing, other firms will enter and will compete away the profit.

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Definitions:

Variability Of Return

Denotes the volatility in the profits or gains from investments over a period.

Risk

The exposure to the potential of loss or damage when the outcome is uncertain.

Risk Aversion

The tendency of investors to prefer lower risk options, avoiding higher risk investments even if they offer potentially higher returns.

Expected Return

The profit or loss an investor anticipates on an investment that has various known or expected rates of return.