Concept:A monopoly can earn abnormal profit in the short-run when its price is above average cost.
Explanation:The short-run is a period when at least one input is fixed while others are variable.
The monopolist produces at the point where marginal revenue equals marginal cost.
At this equilibrium, the monopoly sells output
OM at price
OB.
Since the price
OB is greater than the average cost at output
OM, the firm earns abnormal profit.
This abnormal profit is represented by the shaded area
CAPB.
Thus, the short-run monopoly can make more than normal profit.
Answer:Abnormal Profit (Option B).
