Elaborate the price discrimination feature of monopoly.

OR

Why the number of firms is limited to an oligopoly market? Explain.

Monopoly is a market structure where there is a single firm as a producer of goods. Being the sole operator of the market condition the seller has the authority to fix the price on his own advantage. The best-fit example of monopoly is a railway, post, electricity etc.

The monopolist follows the price discrimination to increase the profit of the firm. Price discrimination means the producer charges different prices to different buyers for the same product with the aim to maximize the profits. The consumers are also bound to buy the commodity at the price fixed the monopolist because no other produce the commodity.

This price discrimination can also happen to capture the economy in form of Dumping. Dumping means selling in the foreign market at a price which even less than the cost of production. The dumped goods are mostly sold in the foreign market at above the average cost but below the marginal cost.

OR

Oligopoly is the form of market organization where there only a few sellers selling the homogenous or differentiated product. The entry and exit by the new firms in the oligopolist market are very difficult. In the oligopolistic industry, the sellers prevent the entry of the new firms by creating the cartels. The cartel is an agreement of existing industries in the market which ensures that there is no new entry of the firms but there will free exit for the existing firms. Reasons for limited firms in an oligopoly

• Cartel

It is the official agreement made existing firms in oligopoly industry to restrict the entry of new firms in the industry.

• Huge cost

There will be a huge cost for setting up the new industries which ordinary firms cannot afford. Cost of setting up new firms is very high.