Which of the following are characteristics of a monopoly...

'Which of the following are characteristics of a monopoly market? (Check all that apply:) In the short run; positive economic profit possible P > MC at the profit maximizing quantity In the long run, positive economic profit possible In the short run, only zero economic profit possible Significant barriers to entry In the long run; firms operate at the minimum of the ATC curve MR MC at the profit maximizing quantity Easy entry/exit MC at the profit maximizing quantity In the long run, only zero economic profit possible'

Transcript

00:01 So here we're talking about monopoly, right? and let's just refresh our minds about what a monopolist is trying to do.

00:07 The monopolist is setting marginal revenue equal to marginal cost, price quantity.

00:12 It is having a demand curve, a marginal revenue.

00:16 Let's put that right there.

00:18 Marginal revenue curve and a marginal cost curve.

00:24 Marginal cost.

00:25 By setting marginal revenue equals to marginal cost, it chooses the quantity.

00:30 And that quantity induces a price that the monopolist will charge.

00:38 So which of these is true? one, profit is possible, right? profit possible.

00:50 Clearly this is true, right? the way i drew it here has, indeed, this box here is profit, right? or at least profit adjusted for fixed ignoring fixed costs.

01:04 So yeah, it's totally possible to get profit because the monopolist will restrict q to put price greater than mc, right? and that gives you a profit margin.

01:20 So two is always also the same, right? it says profit greater than mc at qm.

01:27 This is also true, right? for the exact same logic.

01:32 The monopolist wants to equate marginal revenue with marginal cost.

01:36 They're going to do that by restricting the quantity and driving up the price above the profit market equilibrium.

01:47 Three, again, profit in long run.

01:54 Yes, because the diagram is a long run diagram, right? because monopoly means no entry, right? in the competition, in competition, in the long run, firms will enter the market if the incumbent firms are making profit.

02:20 They'll say, oh, look, profits, we should join this market too, right? but in a monopolist situation, other firms can't join the market.

02:27 That's the whole point of monopoly.

02:29 The other firms can't join the market.

02:31 And so the short run is the long run.

02:33 There is no long run adjustment in monopoly.

02:35 In the long run, the monopolist just keeps on doing what it was doing in the long run.

02:43 For in the short run, profit must equal zero.

02:50 This is wrong, obviously, right? for starters, it contradicts one, which i said was true, but also this is competition, right? this is exactly what you expect to get in competition, not in monopoly, right? it's in competition where you expect to get zero economic profit.

03:13 And even in competition in the short run, you can get positive or minus profit when the market is shocked.

03:22 So that one is completely wrong.

03:23 V, barriers to entry, yes, right? absolutely, barriers to entry, right? c, c or three, sorry, not c.

03:38 These, i'm going to number these, right? the whole idea of monopolies that a monopolist requires some way to protect the market...

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