Research and Development. Supernormal Profit can be used to fund high cost capital investment spending. Successful research can be used for improved products and lower costs in the long term. E.g. Telecommunications and Pharmaceuticals.
Economies of scale. Increased output will lead to a decrease in average costs of production. These can be passed on to consumers in the form of lower prices.
See: Economies of Scale
International Competitiveness. A domestic firm may have Monopoly power in the domestic country but face effective competition in global markets. E.g. British Steel
A firm may become a monopoly through being efficient and dynamic. A monopoly is thus a sign of success not inefficiency.
Monopoly Essay Questions
Discuss whether the govt should be concerned with an increase in the size of firms (15)
Consider why it is difficult for firms to enter some markets but not others (15)
Discuss whether Monopolies always lead to an increase in inefficiency (15)
Discuss the economic consequences of a merger between Nescafe and local growers of coffee in Columbia (15)
