A LEVEL ECONOMICS
NOTES
Evaluate a monopoly's benefits
Point 1: Higher level of allocative efficiency
Monopolies are better placed to fully exploit internal economies of scale.
This is where long run average costs fall as output rises for the firm.
As Apple is such a large company and output at a high quantity they are best placed to tap into
economies of scale.
Apple can exploit purchasing economies of scale where they can bulk buy microchips at a lower
unit cost.
Also, Apple can exploit financial economies of scale because as they are so large and earn high
revenue, they will be able to pay off loans so can receive lower rates of interest and larger loans from
banks which can be used for investment into more productive capital machinery further bringing down
long-run average costs.
NOTES
Evaluate a monopoly's benefits
Point 1: Higher level of allocative efficiency
Monopolies are better placed to fully exploit internal economies of scale.
This is where long run average costs fall as output rises for the firm.
As Apple is such a large company and output at a high quantity they are best placed to tap into
economies of scale.
Apple can exploit purchasing economies of scale where they can bulk buy microchips at a lower
unit cost.
Also, Apple can exploit financial economies of scale because as they are so large and earn high
revenue, they will be able to pay off loans so can receive lower rates of interest and larger loans from
banks which can be used for investment into more productive capital machinery further bringing down
long-run average costs.
