Which of the following statements about monopolies is NOT co

Which of the following statements about monopolies is NOT correct?

a) In the short run, monopolies can suffer losses.

b) In the short run, monopolies never shut down.

c) In the long run, monopolies must at least earn normal profit.

d) In the long run, if losses persist, monopolies will exit the industry.

Solution

ans. (A).In the short run, monopolies can suffer losses.

This is because the the seller in the monopoly market is a price maker so he can charge any price what he wants so there will not be any problem of loss in the short run. The monopolist will always make profits in the short run, the profit maximizes at where the marginal cost equals the marginal revenue.

Becuase the firm enjoys super normal profits in the short run there is not any case of shutting down.