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Microeconomics

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Monopoly: No, It's Not Competitive

MICRO-30DNO2

Monopolistic firms tend to earn an economic profit.

However, it is possible for every firm in competitive markets to earn economic profits too! For example, imagine a competitive market for snow shovels, and a freak snow storm drives up the demand for snow shovels extremely high. Everyone will be able to make a profit until more suppliers join the market.

Given that you can make a profit in either kind of market, why might economists be more concerned about the profits they see in monopolistic markets than in competitive markets?

A

Because profits in competitive markets are distributed equally, while profits in monopolies cause inequality.

B

Because profits in competitive markets are deserved, but profits in monopolistic markets are unfair.

C

Because profits in competitive markets still lead to efficient production in the short run, while profits in monopolistic markets are a result of inefficient production in the short run.

D

Because profits in competitive markets quickly go away, while profits in monopolistic markets persist for a long time.