Question

2. What do you understand by discriminatory monopoly? Bring out the conditions that enables the monopoly firm to charge different prices for its product in different markets. (2 Marks)

Answer 1

A monopoly refers to a dominant position of a firm or a sector in a market for a given product in comparison to all its competitors.

What is a discriminatory monopoly?

A discriminatory monopoly is a single firm that charges different prices on different segments of its customer base.

Three things must be met for price discrimination:

• A firm must have market power,
• A firm must be able to recognize the difference in demand,
• A firm must have the ability to prevent arbitration or the resale of a product.

Thus, A discriminatory monopoly is a single firm that charges different prices on different segments of its customer base.

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