ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
Which of the following is an argument made in favour of allowing a firm to hold a monopoly position, rather than an argument against it?
The argument in favour is that large scale may bring economies of scale and profits that fund innovation. The other options, limited choice, restricted output and deterring entrants, are typical criticisms of monopoly.
- ALarge scale may give economies of scale and fund innovationCorrect
- BCustomers face limited choice
- CThe firm may restrict output to raise prices
- DPotential new entrants may be deterred
Explanation
Supporters of monopoly point to economies of scale and profits that can fund research and innovation, possibly lowering costs. Limited choice, restricted output and barriers to entry are standard criticisms.
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