TheWrongTrick
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One of the advantages of monopoly power is:
"There are few permanent monopolies. Super-normal profits act as an incentive to break down the monopoly through a process of creative destruction ie undermining the monopoly through product development and innovation."
This is in one of the resource sheets that edexcel has provided for economics but I don't quite get what it means. Can someone explain?
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BC95
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(Original post by TheWrongTrick)
One of the advantages of monopoly power is:
"There are few permanent monopolies. Super-normal profits act as an incentive to break down the monopoly through a process of creative destruction ie undermining the monopoly through product development and innovation."
This is in one of the resource sheets that edexcel has provided for economics but I don't quite get what it means. Can someone explain?
Hi there,

creative destruction assumes that some monopolies may not exist in the long-run as small firms can capture some market share by being innovative.

Think of the computer market.

IBM was a monopoly, until Apple who (incentivised partly by super-normal profit) destroyed the IBM monopoly by being more innovative.
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Joemill5000
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It is just saying: monopolies make supernormal profits. You, as a producer, want to earn supernormal profits. Hence, you will have an incentive to try and get into the market BUT you want to break down the monopoly or else you won't survive in the market.

You can't compete on price so it has to be on quality / the good
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