Monopoly in the Long-Run

In the discussion of a perfectly competitive market structure, a distinction was made between short‐run and long‐run market behavior. In the long‐run, all input factors are assumed to be variable, making it possible for firms to enter and exit the market. The consequence of this entry and exit of firms was that each firm's economic profits were reduced to zero in the long‐run.

The distinction between the short‐run and the long‐run is not as important in the case of a monopolistic market structure. The existence of high barriers to entry prevents firms from entering the market even in the long‐run. Therefore, it is possible for the monopolist to avoid competition and continue making positive economic profits in the long‐run.

Economics

Monopoly in the Long-Run