Key Diagrams - Monopoly Supernormal Profit
- A-Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 14 May 2022
This short revision video looks at the diagram used to show supernormal profit earned by a monopoly supplier.
A firm is said to reap monopoly profits when a lack of viable market competition allows it to set its prices above the competitive equilibrium price for a good or service without losing profits to competitors. Barriers to entry protect monopoly profit in the long run. Profit margins for a monopolist will tend to be higher when the coefficient of price elasticity of demand for their product is low.