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Economies of scale are one of the most powerful forces in economics. Answer the following questions related to this very important principle of...
1. Economies of scale are one of the most powerful forces in economics. Answer the following questions related to this very important principle of economics:
a. Explain how economies of scale are particularly important to a monopolist, be they real (in reality, there are very few examples of monopoly in the real economy) or hypothetical.
b. Building on question (a.) above, in the event that a new competitor decided to enter this otherwise monopolistic market and building on their natural competitive advantage of economies of scale, what would the embedded monopolist do to thwart the new competition?
c. Are there any economic lessons that a non-monopoly firm can learn from the hypothetical monopolist in the development of its own strategy for building a competitive advantage in the real world in which it operates? Explain.
