What can economies of scale allow a monopoly to do?

When a monopoly experiences economies of scale, it allows the company to reduce the average cost of production as it increases its level of output. This happens because fixed costs, such as administrative expenses or initial investment, are spread over a larger quantity of goods. Consequently, with lower per-unit costs, a monopoly can afford to invest in better research and development. This investment can lead to the innovation of new products, improvement of existing products, and enhanced efficiencies, which can further strengthen the monopoly's market position.

In contrast, while increasing market competition, offering higher prices to consumers, or reducing the variety of goods produced may occur, these outcomes are often not directly linked to the advantages provided by economies of scale. Instead, a monopoly might actually favor maintaining higher prices due to less competition and may choose to limit variety to optimize production and reduce costs. Therefore, the ability to afford better research and development stands out as the correct benefit of economies of scale in the context of a monopoly.