The Emerson Corporation has a monopoly on the worldwide sale of emeralds. Assuming that Emerson maximizes profit from the sale of emeralds, it follows that

A. the price of emeralds will exceed their marginal cost of production.

B. the price of emeralds will be equal to their marginal cost of production.

C. the price of emeralds will equal their average cost of production in the long run.

D. there is free-entry into the emeralds market for all sellers.

• The correct answer is A. the price of emeralds will exceed their marginal cost of production.

Since Emerson Corporation is a monopolist, its supply and production affect the market of emeralds. Since there is no competition, it can control the price of emeralds and has high market power. A market power makes Emerson Corporation to always earn an economic profit because it makes sure that the price of emeralds will exceed its marginal cost of production. A monopoly does not have an efficient market because the demand curve is downward-sloping. In the long-run, the price of emeralds will not equal the average cost of production. A monopoly will have a high barrier to entry and not many sellers can enter into the market. Here, Emerson Corporation is the dominating seller of emeralds.