Answer to Question #110664 in Economics for Keshav

Question

Compare and contrast the long run equilibrium of a perfectly competitive market with that of a monopolist.

Answer 1

In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. In the long-run equilibrium, both perfectly competitive and monopolistic firms earn zero economic profits.