A monopoly can earn positive profits because it can set the price it charges for its output but faces a horizontal demand curve. can maintain a price such that total revenues will exceed total costs. can sell unlimited quantities at any price it chooses. takes the market price as given and can sell unlimited quantities. Which of the following is a necessary characteristic of a monopoly?<\/p>\n\n\n\n
The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n Correct Answer: can maintain a price such that total revenues will exceed total costs.<\/strong><\/p>\n\n\n\n A monopoly<\/strong> is a market structure characterized by a single firm that is the sole producer of a product or service with no close substitutes<\/strong>. Because of this unique position, the monopolist has significant market power<\/strong>, allowing it to set prices<\/strong> rather than take them as given, as firms in perfectly competitive markets must do.<\/p>\n\n\n\n The statement that best explains why a monopoly can earn positive profits<\/strong> is: Once the monopolist determines the profit-maximizing output level using MR = MC, it uses the demand curve to set the price consumers are willing to pay<\/strong> for that quantity. Because it is the only seller, it does not have to worry about undercutting by competitors. This enables the monopolist to set a price higher than its average total cost (ATC)<\/strong>, thereby ensuring positive economic profits<\/strong>, especially in the long run, as there are high barriers to entry<\/strong> that prevent other firms from entering and eroding those profits.<\/p>\n\n\n\n Other answer choices are incorrect:<\/p>\n\n\n\n A necessary characteristic<\/strong> of a monopoly is the absence of close substitutes<\/strong> and barriers to entry<\/strong>, such as government regulation, control of a key resource, or technological superiority.<\/p>\n","protected":false},"excerpt":{"rendered":" A monopoly can earn positive profits because it can set the price it charges for its output but faces a horizontal demand curve. can maintain a price such that total revenues will exceed total costs. can sell unlimited quantities at any price it chooses. takes the market price as given and can sell unlimited quantities. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-213287","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/213287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=213287"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/213287\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=213287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=213287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=213287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\n\n\nExplanation:<\/h3>\n\n\n\n
\u201cCan maintain a price such that total revenues will exceed total costs.\u201d<\/strong>
This is because the monopolist has control over the price and output decisions. Unlike firms in perfect competition, which face a horizontal (perfectly elastic) demand curve<\/strong>, a monopoly faces a downward-sloping demand curve<\/strong>. This means that to sell more, it must lower the price. However, it can still select the price-output combination<\/strong> that maximizes profit<\/strong> \u2014 typically where marginal revenue (MR) equals marginal cost (MC)<\/strong>.<\/p>\n\n\n\n\n
Necessary Characteristic of a Monopoly:<\/h3>\n\n\n\n