1 economies of scale give an advantage to larger firms


Monopolies can arise several ways. A few examples include:

1. Economies of scale give an advantage to larger firms, which can produce in quantities that result in lower average costs than for smaller firms.

2. The government can create a monopoly by granting a company an exclusive right to serve an area.

3. A company can hold a patent on a product, effectively preventing other companies from producing similar products.

4. A company can own a key input needed for production. By limiting other companies' access to that input, they prevent other firms from entering the market.

5. A company can use the threat of violence to deter others from entering.

Identify a company that you believe is a monopoly. Which of the above best characterizes why that company has a monopoly?

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Business Management: 1 economies of scale give an advantage to larger firms
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