Answer to Question #295051 in Microeconomics for Magodi

Question

With the help of well-labeled diagrams, compare the long run equilibrium of a firm under a

perfectly competitive market structure and a monopoly market structure. [20 marks]

Answer 1

The long-run equilibrium of a perfectly competitive market occurs when marginal revenue equals marginal costs, which is also equal to average total costs.

Therefore, it is possible for the monopolist to avoid competition and continue making positive economic profits in the long‐run.