Economics Perfect Competition Questions
In monopoly, economic profit plays a significant role as it represents the excess revenue earned by the monopolistic firm over and above its total costs, including both explicit and implicit costs. Economic profit serves as a measure of the monopolist's market power and ability to set prices higher than the competitive level. It acts as an incentive for the monopolist to maintain its monopoly position and continue to exploit its market power. Additionally, economic profit in monopoly can attract potential competitors, leading to potential entry barriers and further strengthening the monopolist's position in the market.