1. In a monopoly market there is only 1 (one) company providing goods/services. Resistance Significant entry under monopoly, however, would allow company to maintain its supernormal profit in the long run. Different In a perfectly competitive market, any supernormal profit made in the short run will be rivaled in the long run, because new firms can enter the industry. Monopoly markets lead to lower production and higher prices, and it is not in the consumer's best interest. Consumers pay more more for their goods and the monopolist earns more profit.

a. Explain using the demand curve (D), the marginal revenue curve (MR), marginal cost (MC) curve, and supernormal profit average cost (AC) curve produced by the monopolist.

b. Also explain with the curve above that the monopolist produces lower output than the industry in a perfectly competitive market.

2. In a perfectly competitive market, firms determine the price of the product follows the market price (price-taker). In the short run (in the short-run) it is assumed that the number of companies cannot be increased, there is no time for new companies to enter the market. Let's say the company operates with efficient and enjoy supernormal profit. Such profit in the long-run will tend to attract new firms into the industry, because it will give them a better return on investment than anywhere else.

a. Explain with the demand and supply curves in the industry so that we get market equilibrium price. b. Explain with curves marginal revenue (MR), marginal cost (MC), and average cost (AC) that in the short-run the company earned supernormal profits. c. Explain the new market equilibrium price in the long-run after the entry new companies into the industry. What will happen to the supply curve and what will happen to the new market equilibrium price?

d. With the new market equilibrium price, explain what will happen to the company profit (long-run equilibrium).