Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 15

The accompanying diagram shows demand and long-run cost conditions in an industry.
a. Explain why the industry is likely to be monopolized.
b. Indicate the price that a profit-maximizing monopolist would charge and label it P.
c. Indicate the monopolist's output level and label it Q.
d. Indicate the maximum profits of the monopolist.
e. Will the profits attract competitors to the industry? Why or why not? Explain.