Paper 3 · Market Structures
Which market structure allows firms to go on earning supernormal profits in the long run, because significant barriers prevent new firms from entering to compete the profits away?
Aperfect competition, where firms are price takers and entry is free.
Bmonopolistic competition, where product differentiation gives firms some pricing power.
Cmonopoly, where high barriers to entry block potential competitors.
Da competitive market with free entry and exit for all firms.
Explanation: Barriers to entry such as patents, large economies of scale, or legal restrictions stop new firms from entering a monopolised market, so unlike perfectly or monopolistically competitive markets, where entry is comparatively free, a monopolist can sustain supernormal profit indefinitely.
Derived from ZIMSEC Economics Paper 3, June 2004, Q4
