ECON1001 Study Guide - Final Guide: Price Discrimination, Demand Curve, Marginal Revenue

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Monopolists always earn excessive profits and are always inefficient. explain your answer. Monopolists often earn excessive profits and are inefficient but not always. Regulation or more sophisticated pricing can address these problems. Monopolist can be efficient when no consumers pay more then the mc of the product- can be achieved through regulation or price discrimination. And monopolists can make losses if fixed costs are high relative to demand for the product. A monopoly is efficient when there are no consumers willing to pay more for the good or service than the marginal cost of production. This can be achieved by either certain forms of price discrimination or regulation: explain how economic forces drive economic profits to zero in the long run in perfect competition. If there are economic profits in an industry firms will enter the industry. This shifts the supply curve to the right and as long as demand is downward sloping prices fall.

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