Answer to Question #165522 in Economics of Enterprise for Robin

Question

If there are substantial economies of scale to exploit, a monopolist will be more productive efficient than many competitive firms in the market, and the monopolist will also be allocative efficient. How fair does the claim goes to be valid (agreeable), and which part makes it disagreeable. Provide justification for both the valid and invalid points.

Answer 1

The monopolies can be more productive efficient by producing more products at relatively low prices that can be affordable by all consumers, that in the perfectly competitive market because monopolies have the advantage of large economies of scale. But this is not the case for the monopolies in the market; in the ideal situation, the monopolie4s will tend to take advantage of their dominance by producing fewer products with the intention of i9ncreasing the prices for their benefits. Monopolies also tend to be less innovative in their products because there is no competition in the market