Cover Work Econ Y12 Wednesday

Y12 Economics

Ensure you have read and taken notes on pages 97-99 – the activity is rather dated now, therefore I want you to read the following:

Focus page 97 of the text book

Monopoly and monopoly power

• Monopolies that they are able to restrict supply so that customers pay a higher price for their products.
• This potentially allows them to make higher levels of profits, than a competitive firm.
• There is a transfer of welfare in the form of consumer surplus to monopoly business as producer surplus.

External benefits of a monopoly

• Higher profits provide the possibility for higher expenditure on R&D. This leads to the potential for new techniques in production and new products, which can raise the welfare of consumers over time.
• Economies of scale – larger scale production can lead to lower average costs as firms are able to use larger machines for example.
• Monopolies with higher R&D and which are able to access economies of scale may be better able to compete in world markets, which brings

Task one

Use the information above, and your research on consumer and producer surplus, in small groups of (three/two), first plan and then produce a response to the question:

“MICROSOFT have been on the cutting edge of innovation, transforming our economy, generating jobs and wealth and boosting our competitiveness in the global market place” (Congressional record, 1998).

Discuss whether, on balance, the impact of Microsoft has been favourable.
You must produce a cohesive and detailed argument – this means using the issues identifies above with fully worked specific examples based on Microsoft, which you evaluate comparatively.