Th3.4: Extra Monopoly Info

Question 1

Why are there a few permanent monopolies?

Answer 1

since supernormal profits give an incentive for other firms to break down the monopoly through a process of creative destruction

Question 2

Why do some suggest a monopoly, or the possibility of having a monopoly, is good in the short run?

Answer 2

as it provides incentive to invest and innovate which is good for both the company and the economy

Question 3

Why are the bad aspects of monopoly more likely to become true in the long run?

Answer 3

as firms can simply enjoy the benefits and become complacent

Question 4

What will the effects of a monopoly depend on?

Answer 4

the industry - in industries with high fixed costs, the gains from economies of scale will be higher