Are there any cases where a monopoly is beneficial to the economy?
What will be an ideal response?
Firms that are allowed monopoly profits search out every possible avenue for innovative technologies that they can bring to market. If there were perfect competition, firms would have less of a reason to invest in research and development because they would not enjoy the same levels of profit from innovation. Through entry, economic profits would be driven to zero in the long run. If innovators are not granted protection, profits may not be available to spur invention. So, granting patents and copyrights involves a tradeoff between the deadweight loss of a monopoly and the incentive for research and development. It may also be the case that the firm is a natural monopoly, which means it will enjoy economies of scale that make it more efficient for a single firm to operate in the market. Splitting supply between firms will leave each seller with higher costs and lower profits.
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Based on the cost data in the above table, the long-run average cost (LRAC) is lowest when output is
A) 20. B) 40. C) 80. D) Long-run average cost is constant at all levels of output.
Look at the above figure. A union wishes to maximize wage income for employed union members, so it should aim for a wage rate ________ and a number of employed members equal to ________
A) W1, Q3 B) W2, Q2 C) W3, Q1 D) W4, Q3