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The degree of monopoly power is to be measured in terms of the firm's
- a)normal profit
- b)supernormal profit
- c)both normal and supernormal profit
- d)selling price
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
The degree of monopoly power is to be measured in terms of the firm's...
Supernormal profit is also called economic profit, and abnormal profit, and is earned when total revenue is greater than the total costs. Total costs include a reward to all the factors, including normal profit.
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The degree of monopoly power is to be measured in terms of the firm's...
Measurement of Monopoly Power
Monopoly power refers to the ability of a firm to set prices above the competitive level and restrict output. In order to measure the degree of monopoly power, one needs to look at the firm's ability to earn supernormal profits.
Supernormal Profit
Supernormal profit is the excess profit earned by a firm over and above normal profit. Normal profit is the minimum level of profit required to keep a firm in operation, covering all costs including opportunity costs. When a firm earns supernormal profit, it indicates that the firm has monopoly power in the market.
Measurement
By looking at the amount of supernormal profit a firm is earning, one can gauge the degree of monopoly power. The higher the supernormal profit, the greater the monopoly power of the firm. This is because in a competitive market, firms would only earn normal profit due to the presence of perfect competition driving prices down to the cost of production.
Conclusion
Therefore, the degree of monopoly power is measured in terms of the firm's ability to earn supernormal profit. This indicates the firm's ability to set prices above the competitive level and restrict output, highlighting its market power and dominance.
Monopoly power refers to the ability of a firm to set prices above the competitive level and restrict output. In order to measure the degree of monopoly power, one needs to look at the firm's ability to earn supernormal profits.
Supernormal Profit
Supernormal profit is the excess profit earned by a firm over and above normal profit. Normal profit is the minimum level of profit required to keep a firm in operation, covering all costs including opportunity costs. When a firm earns supernormal profit, it indicates that the firm has monopoly power in the market.
Measurement
By looking at the amount of supernormal profit a firm is earning, one can gauge the degree of monopoly power. The higher the supernormal profit, the greater the monopoly power of the firm. This is because in a competitive market, firms would only earn normal profit due to the presence of perfect competition driving prices down to the cost of production.
Conclusion
Therefore, the degree of monopoly power is measured in terms of the firm's ability to earn supernormal profit. This indicates the firm's ability to set prices above the competitive level and restrict output, highlighting its market power and dominance.
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The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer?
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The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer?.
The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The degree of monopoly power is to be measured in terms of the firm'sa)normal profitb)supernormal profitc)both normal and supernormal profitd)selling priceCorrect answer is option 'B'. Can you explain this answer?.
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