economics (monopoly)

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anikaa101
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#1
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#1
the question is
Evaluate the statement that monopoly should be considered as an undesirable form of market structure (25 marks)

i could not find the mark scheme so please help me with this question.
PS my exam board is AQA but could not find this question
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BenRyan99
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You should really try to do your own work or at least look at a textbook! However, I'll mention some things that should hopefully prompt you to think of some answers.

Firstly, a monopoly is naturally quite undesirable in the obvious way in that because they produce where MR=MC, they produce a smaller quantity of goods and charge a higher price for them compared to perfect competition. There's also a welfare loss because of this which you can show in a diagram.

On the other side of the argument, you could say that monopolies generate super normal profits and so can invest in research & development whereas firms in perfect competition don't make supernormal profits so can't invest to make their products better. You could also go with the creative destruction type argument where you say that monopolies should be able to make profits and these are just the temporary rewards for innovation, without the incentive of profits, firms wouldn't invest in R&D leading to less/worse goods/services for consumers
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anikaa101
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#3
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(Original post by BenRyan99)
You should really try to do your own work or at least look at a textbook! However, I'll mention some things that should hopefully prompt you to think of some answers.

Firstly, a monopoly is naturally quite undesirable in the obvious way in that because they produce where MR=MC, they produce a smaller quantity of goods and charge a higher price for them compared to perfect competition. There's also a welfare loss because of this which you can show in a diagram.

On the other side of the argument, you could say that monopolies generate super normal profits and so can invest in research & development whereas firms in perfect competition don't make supernormal profits so can't invest to make their products better. You could also go with the creative destruction type argument where you say that monopolies should be able to make profits and these are just the temporary rewards for innovation, without the incentive of profits, firms wouldn't invest in R&D leading to less/worse goods/services for consumers
Thanks for your help. Just thought to let you know I do have my own plan for this essay, I was not sure if my answers were right which is why I'm here asking for help as I could not find the mark scheme for this question
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boredrnngl
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#4
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#4
(Original post by anikaa101)
the question is
Evaluate the statement that monopoly should be considered as an undesirable form of market structure (25 marks)

i could not find the mark scheme so please help me with this question.
PS my exam board is AQA but could not find this question
is this for Edexcel or aqa?
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A Bunch of Nuns
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(Original post by BenRyan99)
You should really try to do your own work or at least look at a textbook! However, I'll mention some things that should hopefully prompt you to think of some answers.

Firstly, a monopoly is naturally quite undesirable in the obvious way in that because they produce where MR=MC, they produce a smaller quantity of goods and charge a higher price for them compared to perfect competition. There's also a welfare loss because of this which you can show in a diagram.

On the other side of the argument, you could say that monopolies generate super normal profits and so can invest in research & development whereas firms in perfect competition don't make supernormal profits so can't invest to make their products better. You could also go with the creative destruction type argument where you say that monopolies should be able to make profits and these are just the temporary rewards for innovation, without the incentive of profits, firms wouldn't invest in R&D leading to less/worse goods/services for consumers
Not sure if you've covered this in your exam board but you can also mention beneficial price discrimination as a positive for monopolies.
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BenRyan99
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#6
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(Original post by A Bunch of Nuns)
Not sure if you've covered this in your exam board but you can also mention beneficial price discrimination as a positive for monopolies.
A lot of monopolies can't price discriminate as they can't prevent resale, if they can do this then it's possible
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anikaa101
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#7
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(Original post by boredrnngl)
is this for Edexcel or aqa?
aqa
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