Long-run Equilibrium under Monopoly:

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.

long run equilibrium under monopoly

All such conditions are explained below in the diagram. Equilibrium point of firm is when

  • MC = MR
  • MC cuts MR from below
In diagram firms total revenue is OPJQ and total cost OCKQ.

Ad

Share this

Ad

Ad

About Us

Guidanceportal is a place to learn “the Knowledge” not mere information. Our vision is to spread knowledge of different fields of study and provide guidance in the most simplest and self explanatory way. Our team consists of skillful personnel working in different fields of life who share their practical experience and knowledge.

We understand the importance of continuous refinement & improvement thus your participation in the form of comments will be highly appreciated.

Guidanceportal Team