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In the long run, a monopolist differs from a perfectly competitive firm in that the monopolist:
AIs forced down to normal profit by the entry of new firms
BCan continue to earn supernormal profit because entry is blocked
CMust always produce at the minimum point of its LAC curve
DFaces a perfectly elastic demand curve in equilibrium
Answer & Solution
Correct answer: B. Can continue to earn supernormal profit because entry is blocked
1. In perfect competition, free entry erodes any supernormal profit in the long run.
2. A monopolist is protected by barriers to entry, so no rivals can enter.
3. Without entry, supernormal profit is not competed away.
4. The monopolist therefore can keep earning supernormal profit even in the long run.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.14_
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