Answer to Question #205606 in Economics for Kyle Davids

Question

which firms does not earn normal profits in the long run?

Answer 1

Monopolies can maintain super-normal profits in the long run. As with all firms, profits are maximised when MC = MR. In general, the level of profit depends upon the degree of competition in the market, which for a pure monopoly is zero.

Oligopolies can also retain long run abnormal profits. High barriers of entry prevent sideline firms from entering the market to capture excess profits.