As we have already discussed that in monopoly situation there is no possibility for the entry of new firms or companies in the market even in a long run period. Monopoly firm is free to extend and contract its business according to its will; there is no kind of restrictions even according to business point of view.
In long run period all the inputs are variable and monopoly firm can install new machinery and can upgrade its size to decrease the cost of production process. In long run period, if the average revenue curve is above than the long run average cost (LAC) than firm will earn profit.
All such conditions are explained below in the diagram. Equilibrium point of firm is when
- MC = MR
- MC cuts MR from below