Q10 of 25 Page 1

Explain the following features of the monopoly market :

(a) Restriction to Entry


(b) Price Discrimination


(a) Restriction to Entry-


● It is not possible for permitting entry into this industry.


● Even if a new fIrm is admitted into this industry, the Monopoly will itself remove it.


● This barrier to entry may be legal such as licensing or due to the restrictions created by the firm in the form of the cartel.


● This allows the monopolist firm to earn an abnormal profit or loss in the long run.


● For example, the production of many defense goods is a Monopoly of the government.


(b) Price Discrimination-


● A monopoly has the power to exercise price discrimination.


● Price discrimination refers to the practice of selling the same commodity to different customers at different prices.


● For example, a doctor may charge a lesser fee for the poor and higher fees from the others.


More from this chapter

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8

At a price of < 5 per unit, a consumer buys 40 units of a commodity. The coefficient of price elasticity of demand is given as (–)2. How many units of the commodity will she buy if the price is reduced by 20 %?

 9

Why is the short-run marginal cost curve ‘U-shaped’?

OR


Distinguish between ‘Supply’ and ‘Quantity Supplied’.


 11

What is meant by diminishing returns to a factor? Discuss briefly, any

two reasons behind its operation.


 12

(a) What is the slope of an Indifference curve?

(b) A rational consumer is consuming only two goods, Good X and Good Y. The prices of the goods are < 20 and < 10 respectively. Her total money income is < 200. Answer the following questions, using the given information :


(i) State her Budget line equation.


(ii) State the slope of the Budget line of the consumer.


(iii) If she decides to spend her entire income on Good Y, how many units of Good Y can she buy?


OR


Discuss the law of equi-marginal utility.