Unlike perfectly competitive firms, monopolists:

a. Earn positive short-run economic profit even if the price is less than the average variable cost at all rates of output,

b. Sell any quantity of output at any price they choose,

c. Earn long-run economic profits,

d. Reduce the sales of firms in other industries through advertising,

e. Face a perfectly elastic demand curve.

• The correct answer is c. Earn long-run economic profits.

Monopolists have the ability to earn positive economic profits in the short and long run. This ability is the result of the high barriers to entry to the market and the number of competitors. Since a monopolistic market has only one competitor, its ability to limit output and increase prices in the long run as well as in the short run, allows it to earn positive economic profits. On the other hand, perfectly competitive firms can only earn positive economic profits in the short run since there are no barriers to entry the market and new competitors can supply the market in the long run. The increase in supply leads to a decrease in prices and zero economic profits. Therefore, the correct answer is option c. On the other hand. option a. is incorrect because if the price is below the average variable cost, the firm should shut down. Option b. is incorrect because monopolists can limit the output; however, increasing the output level above what the market is willing to buy is not efficient. Option d. is incorrect because the products offered by monopolists do not have substitutes and the advertising does not affect other industries. Option e. is incorrect because the demand of monopolists is inelastic.