question archive Under what condition will a monopoly incur losses?
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Under what condition will a monopoly incur losses?
A monopoly will incur losses if the product's price is lower than the costs incurred in the product's production process.
In most cases, such losses in a monopoly occur in the short-run, hence referred to as the short-run losses. If the production cost is higher per product than the product's actual price, it means that the firm is not making their usual profits or is not making profits at all. Since the government sets the prices, there are price floors and ceilings to specific products, meaning that a monopolist cannot exceed or sell below the given price despite the cost of producing the product within a given period. Moreover, losses in a monopoly market structure can occur in the absence of a monopoly supply curve, which indicates the amount supplied and the quantity demanded within a given period, thus making it challenging to determine the market changes in the supply of a given period.