In the long run, which of the following is not a problem for a monopolist earning economic profit?
A)other firms have an incentive to create substitutes for the monopolist's product
B)technological change tends to break down barriers to entry
C)patents expire, licenses must be renewed, and new sources of essential resources may be discovered
D)government often decides to regulate monopolies
E)all profit will gradually be converted to consumer surplus

Question

Quizplus · Accepted Answer

Over time, economic profit will attract new firms to enter the market, which will eventually erode the monopolist's market power and reduce their ability to earn economic profit. As new firms enter and compete, the monopolist will have to lower prices to maintain their market share, and profit will gradually be converted to consumer surplus. This is a natural process that occurs in competitive markets, and is not a specific problem for monopolists. However, the other options listed are all potential challenges that monopolists may face, including the threat of substitutes, technological change, expiration of patents/licenses, and government regulation.

In the Long Run, Which of the Following Is Not