Which one of the following helps to explain why long-run abnormal profits are absent in a perfectly competitive market but can persist in a monopoly market?
Monopolists face a perfectly elastic demand curve which allows them to raise prices without losing customers.
In a perfectly competitive market, the absence of barriers to entry allows new entry to erode abnormal profits.
Perfectly competitive firms spend heavily on persuasive advertising to maintain market share, which reduces long-run profits.
Monopolists always operate at the minimum point of their average cost curve, assuring high profit margins.
136 exam-style questions on AQA A Level Economics 1.5 Perfect competition, imperfectly competitive markets and monopoly, covering 1.5.1 Market structures, 1.5.2 The objectives of firms, 1.5.3 Perfect competition, 1.5.4 Monopolistic competition (A-level only), 1.5.5 Oligopoly (A-level only), 1.5.6 Monopoly and monopoly power, 1.5.7 Price discrimination (A-level only), 1.5.8 The dynamics of competition and competitive market processes, 1.5.9 Contestable and non-contestable markets (A-level only), 1.5.10 Market structure, static efficiency, dynamic efficiency and resource allocation (A-level only), and 1.5.11 Consumer and producer surplus (A-level only). Each one has a worked solution and a mark scheme showing where the marks go.