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    Minimum Efficiency Scale

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    Several of you have mentioned that monoplies arise from economies of scale: a particularly interesting issue is the concept of Minimum Efficiency Scale (MES).

    Are monoplies necessarily bad?
    In what cases are monopolies necessarily evils that are preferable to wasteful competition?
    The AT&T situation until its 1984 break-up, or others such as Boeing and Airbus, may give us some useful insights.
    Other examples that would be interesting to discuss are the cases in which the government supports the existence of monoplies by giving them exclusives licenses/franchises, and why it makes sense to do so.

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    Monopolies are not necessarily bad. Despite their reputation for evil, monopolies can actually generate a net benefit for society under certain circumstances. These are usually situations in which the power and duration of the monopoly are carefully limited. Natural monopolies can be particularly beneficial. This is because of their ability to attain lower costs of production, often far lower, than would be possible with ...

    Solution Summary

    The concept of Minimum Efficiency Scale is discussed.