The diagram below represents the long run equilibrium of a firm in Monopoly. (i) Write in words the full label (not abbreviations) for each of the lines numbered 1 to 3. Use the answer box provided. Answer Box Number Full label 1 2 3 (ii) Some firms may wish to enter a monopoly industry but face barriers to entry. Outline one possible barrier to entry.

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The diagram below represents the long run equilibrium of a firm in Monopoly - Leaving Cert Economics - Question 2 - 2018

Question 2

The diagram below represents the long run equilibrium of a firm in Monopoly. (i) Write in words the full label (not abbreviations) for each of the lines numbered 1 ... show full transcript

Worked Solution & Example Answer:The diagram below represents the long run equilibrium of a firm in Monopoly - Leaving Cert Economics - Question 2 - 2018

Step 1

Write in words the full label (not abbreviations) for each of the lines numbered 1 to 3.

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Answer

Marginal Cost: This line represents the additional cost incurred by producing one more unit of output, which is crucial for firms to determine the optimal production level in a monopoly market.
Average Cost: This line shows the total cost per unit of output, which helps to explain the firm's pricing strategy and profit maximization.
Average Revenue: This represents the average revenue per unit sold, which is critical in understanding the demand curve faced by a monopolist.

Step 2

Outline one possible barrier to entry.

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Answer

One possible barrier to entry is that a firm may acquire the sole right to the available raw materials. This means that the firm can control the resources necessary for production, making it difficult for new entrants to compete in the market.

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