Profits of a monopoly are driven to zero
A)Immediately in the short-run as assets freely move from low-valued uses to high-valued uses instantly
B)In the long run because the demand curve becomes more inelastic
C)In the long run because the assets eventually move from low to high valued use
D)In the short run because the demand curve becomes more elastic

Question

​Profits of a monopoly are driven to zero
A)​Immediately in the short-run as assets freely move from low-valued uses to high-valued uses instantly
B)In the long run because the demand curve becomes more inelastic
C)In the long run because the assets eventually move from low to high valued use
D)​In the short run because the demand curve becomes more elastic

Quizplus · Accepted Answer

Over time, in a monopoly, other firms or new competitors may enter the market or develop substitute products, causing the demand curve to become more elastic and reducing the monopoly's market power. As a result, the monopoly's profits are driven towards zero in the long run. Additionally, the assets of the monopoly may eventually move from low-valued uses to high-valued uses as new opportunities arise, further reducing their market power. This process may take time, but ultimately the monopoly will face competition or alternative opportunities that lead to reduced profits.

​Profits of a Monopoly Are Driven to Zero

Profits of a Monopoly Are Driven to Zero