Hi Tutor,

When economic profit exists for a firm, it is very tenuous because...

1. costs will inevitably increase and eliminate profit
2. price will fall because market supply will increase
3. firms are driven to increase output to the point where average total cost will equal price
4. firms are driven to reduce output until average total cost equals price

and then, what is the least likely outcome for a firm enjoying a monopoly in an industry that has a continually falling log run average cost curve?

1. the government regulates the firm as a monopoly
2. buyers find ways to acquire a non monopoly price from the producer by having a group purchasing agent to do the buying
3. the firm charges a monopoly price and goes unchallenged
4. buyers contract with a new producer to provide a market in exchange for a less than monopoly price or the fear of this possibility keeps the monopolist from profit maximising